* Dollar index at 11-month high thanks to dollar's broad
* Euro/dollar at 9-month low, risks fall below $1.30
* Dollar/yen seen testing July peak of 103.15 yen
* Sterling at 4-month low after soft UK inflation data
By Hideyuki Sano
TOKYO, Aug 20 The dollar held firm near 11-month
high against a basket of major currencies on Wednesday after
strong U.S. housing data added to hopes of a firming recovery in
the world's biggest economy.
The dollar index stood at 81.870, having risen
to 81.899 in the previous session, its highest level since
U.S. housing starts and building permits rebounded strongly
in July, suggesting the housing market recovery was back on
track after stalling in the second half of last year.
Groundbreaking surged 15.7 percent to a seasonally adjusted
annual 1.09-million unit pace, surpassing economists forecast of
a much smaller rise to a 969,000-unit rate last month.
The data knocked the euro below its major support around
$1.3330, to a nine-month low of $1.3313. The single
currency last traded at $1.3321.
That has brought the euro's decline from its 2 1/2-year peak
reached in May to almost five percent, as the common currency
was hit by worries that tit-for-tat sanctions between the West
and Russia could hurt the euro zone economy more than the United
States because of its closer economic ties with Russia.
Even without the Ukraine crisis to contend with, the euro
zone recovery had been tepid at best as the currency bloc's
southern countries continue to struggle under the weight of
tight fiscal policy aimed at reducing their debt load.
"The euro looks particularly weak. Investment into the euro
zone could stall. I feel it's time to think that the euro will
fall below $1.30," said Kyosuke Suzuki, director of forex at
The dollar also inched up against the yen, rising to
three-week highs of 102.97 yen in early trade. Traders
see a test of 103.15 yen, a three-month high touched in late
July, as likely.
The British pound also lost steam, hitting a four-month low
against the dollar after data showed British inflation slowed
more than expected and eased pressure on the Bank of England to
raise interest rates.
The pound fell to as low as $1.6611 on Tuesday and last
stood at $1.6619.
The Australian dollar fetched $0.0297, so far
showing limited reaction to comments by the head of the
Australian central bank, who repeated warnings against the
(Editing by Shri Navaratnam)