* Strong Empire State and PPI data helps dollar rally
* Yen weakens, Australian dollar also suffers
* Canadian dollar hits fresh four-year low against dollar
By Curtis Skinner
New York, Jan 15 The dollar index gained for a
second straight day on Wednesday, helped by strong U.S. regional
manufacturing and price data that lifted the greenback further
from a one-month low against the yen and sent the Canadian
dollar to a fresh four-year low.
The dollar was up 0.5 percent against a basket of
currencies to 81.104. It rose 0.3 percent to 104.560 yen,
building on Tuesday's recovery, when it rallied more than 1
"The data that we've since the payrolls report since Friday
has been quite positive, and I think suggests that Friday's
payrolls report was more of an outlier or aberration than any
signal that we're seeing a broad slowdown of the U.S. economy,"
said Omer Esiner, chief market analyst at Commonwealth Foreign
The euro was down 0.7 percent against the dollar at $1.3580
, hitting a session low after U.S. producer prices
recorded their largest increase in six months in December. Core
U.S. producer prices, which exclude volatile food and energy
costs, are up 1.4 percent on a year-over-year basis, a still
benign level of wholesale pressure.
Still, the data was enough to cause bond prices to fall,
pushing U.S. Treasury yields higher.
Rising yields often results in gains in the dollar index.
A separate report showed manufacturing activity in New York
state jumped to its highest level in 20 months in January. The
data modestly raised expectations that inflation may start
picking up and potentially bring forward the timeline in which
the Federal Reserve will start raising rates.
Also helping underpin the dollar, two of the Federal
Reserve's most hawkish policymakers who take up voting power
this year said Tuesday the central bank should bring its
bond-buying program to a swift close.
Investors quickly brought forward the likely timing of the
first Fed rate hike to August 2015 , having only just
pushed it out towards the back end of 2015 in the wake of
Friday's jobs numbers.
By contrast, the Bank of Japan is expected to continue
pumping in trillions of yen to help the economic recovery while
the European Central Bank is still grappling with falling
inflation and has pledged to keep rates low for longer.
But with the ECB's balance sheet still contracting as banks
repay cheap loans availed of earlier, the euro's losses against
the dollar are likely to be muted, analysts said. Repayment of
these loans causes excess liquidity in the euro zone banking
system to shrink and pushes up short-term money market rates.
The dollar continued its climb and hit a fresh four-year
high against its Canadian counterpart of C$1.0991. The
greenback was last up 0.1 percent to C$1.0953.
The euro also peaked near its four-year high against the
Canadian dollar at C$1.4892, with the latter under
broad pressure after recent weak data raised concerns about
whether the Bank of Canada may sound more dovish next week.
The single currency steadily dropped in morning trading,
though, as investors fret over tomorrow's data release.
"For the Euro side of the equation, there's a tremendous
risk in the Euro CPI. Should that disappoint tomorrow, that puts
the ECB in an awkward position," said Camilla Sutton, chief
currency strategist at Scotiabank.
The single currency was last down 0.7 percent to C$1.4880,
according to Reuters data.