US Dollar adds gains after pending home sales data

Frankfurt (May 28)  The dollar briefly added to earlier gains versus the euro and yen on Thursday as a stronger-than-expected 3.4 percent rise in domestic pending home sales in April supported the view of a spring revival in the housing market.

The euro fell to a session low at $1.08670. It last traded down 0.05 percent at $1.08990.

The biggest mover on major currency markets was the Australian dollar, which shed 1.2 percent against a rallying greenback after disappointing Australian capital expenditure data prompted speculation about another rate cut next week.

The dollar reached a session high against the yen at 124.460 yen on the EBS trading platform before subsiding to 124.195, up 0.4 percent from its U.S. close on Wednesday.

Traders said players are now wary of potential verbal intervention by Japanese officials to steady the yen. On Wednesday, Japanese policymakers cautioned markets against pushing the yen down too rapidly.

"I think the move in the yen is not really reflecting fundamentals," said Nikolaos Sgouropoulos, a G10 currency strategist at Barclays in London.

"We don't think Japanese authorities are going to be particularly happy with the yen weakening further, particularly given the extreme levels of undervaluation ... We still like dollar/yen lower."

The dollar is on track for its best month against the yen since November, gaining over 4 percent since the start of May.

"Macro funds betting on a September Fed rate hike have increased their long exposure to the dollar, which was the main driving force behind the rise this week," said Yunosuke Ikeda, head of FX strategy at Nomura Securities, which has many hedge fund clients.

The single currency had earlier been boosted by tentative signs that Greece may be nearing a deal to secure fresh funding before an IMF loan repayment on June 5, but gave up its gains against the dollar as U.S. traders arrived at their desks.

"The market clearly doesn't think that the June 5 deadline really is a deadline, and I think we're drifting further in that direction," said Adam Cole, global head of FX strategy at RBC Capital Markets. "So that's diminishing the risk premium in the euro."

Commodity currencies came under pressure across the board, with the Aussie hitting a six-week low of $0.7623, and New Zealand's dollar shedding over 1 percent to trade at $0.7130, its weakest in over four years.

The Canadian dollar also traded lower at C$1.2530 against its U.S. counterpart.

Source: Frankfurt