FOREX-Dollar gains after U.S. housing, consumer confidence data

Tue Jun 24, 2014 10:54am EDT

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By Sam Forgione

NEW YORK, June 24 (Reuters) - The U.S. dollar edged higher on Tuesday after stronger-than-expected U.S. housing and consumer confidence data increased expectations of a more hawkish tone from the Federal Reserve.

The Commerce Department said sales of new single-family homes surged 18.6 percent to a seasonally adjusted annual rate of 504,000 units in May. That was the highest since May 2008, while the increase was the biggest since January 1992.

The Conference Board, an industry group, said its index of consumer attitudes rose to 85.2 in June from a downwardly revised 82.2 in May. Economists had expected a reading of 83.5, according to a Reuters poll.

"FOMC officials have certainly become concerned about stagnation in the housing market, and the data today might alleviate that concern," said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut, referring to Fed policymakers.

Daingerfield added that this "could ... lead to a more hawkish tone," although he said inflation data would be more crucial. Traders are watching for signs of when the Fed will begin hiking U.S. interest rates from rock-bottom levels.

The data, which lifted the dollar broadly against a basket of major currencies, erased the euro's modest gains against the dollar and strengthened its gains against the yen.

Earlier the dollar had weakened after news that U.S. single-family home prices rose less than expected in April. The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.2 percent in April on a seasonally adjusted basis, below economists' median forecast, according to a Reuters poll.

The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last up 0.09 percent at 80.343. The euro was last down 0.01 percent to trade at $1.3600, while the dollar was last up 0.17 percent against the yen at 102.10 yen.

The dollar was last up 0.08 percent against the Swiss franc to trade at 0.8950 franc, while the pound fell 0.3 percent against the dollar to trade at $1.6975 after Bank of England chief Mark Carney did little to bolster interest rate hike expectations.

Carney, his deputy Charlie Bean and Monetary Policy Committee member David Miles told lawmakers the UK economy had spare capacity that needed to be used up before rates rose.

The currency last traded at a one-week low after rising to its highest in nearly six years last week against the dollar after Carney said rates may rise earlier than markets were predicting.

"The main message is there's no need for an immediate rate hike," said Charles St-Arnaud, currency strategist at Nomura Securities in London. "Don't expect too much of a hawkish tone from the Bank of England until the fourth quarter." (Reporting by Sam Forgione; Editing by James Dalgleish)

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