The dollar rose more than 1 percent against other major currencies on Tuesday, extending recent gains largely driven by increasing expectations the Federal Reserve will start raising US interest rates in 2015. The dollar climbed to its highest in nearly eight years against the Japanese yen and pushed the euro, already weighed down by anxieties over Greece's financial crisis, below $1.09 for the first time in a month.
The dollar index, composed of six leading currencies traded against the greenback, was last up 1.15 percent. That was the latest in a string of gains since last week, when US core inflation rose unexpectedly and Fed Chair Janet Yellen said a rate hike looked likely before year's end.
Against the yen, the dollar broke through longer-term resistance and topped 123 yen to a high of 123.28 yen, a level last seen in July 2007, after government officials reported that US business investment spending plans increased solidly for a second straight month in April. US non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.0 percent last month after an upwardly revised 1.5 percent increase in March, according to the Commerce Department. "With US interest yields looking to move up, that has been supportive of the dollar against the yen," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. The euro was last off 0.85 percent at $1.0882, near its low for the day as traders pointed to growing nerves over Greece, as well as a fall-back in German government bond yields, as making the dollar relatively more attractive.
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