* Dollar index gains after U.S. durable good orders
* Fed officials play down chances of imminent stimulus
NEW YORK, June 25 The dollar recovered from
early losses and rallied against the euro on Tuesday after a
report showed orders for long-lasting U.S. manufactured goods
rose more than expected in May and a gauge of planned business
spending increased for a third straight month.
Durable good orders increased by a better than expected 3.6
percent as demand for goods ranging from aircraft to machinery
rose, the Commerce Department said on Tuesday. Orders for these
goods, which range from toasters to aircraft, had increased by a
revised 3.6 percent in April.
Separate data showed prices of U.S. single-family homes
jumped in April to rack up their biggest annual gain in seven
years, adding to optimism around the dollar..
"The dollar has been trading on Fed speculation for the last
two weeks," said John Doyle, currency strategist at Tempus Inc
in Washington. "Yesterday, comments from two Fed officials were
more dovish than Bernanke but attention has now shifted to
durable goods which were good for the 'tapering sooner'
Earlier the dollar index fell for the first time in a week
against a currency basket on the back of Monday's comments from
Minneapolis Fed President Narayana Kocherlakota and Dallas Fed
head Richard Fisher who both reassured investors who were
fearing the impact of the Fed tapering its monthly $85 billion
But after the durable goods report, the dollar index
rose 0.1 percent to 82.502 for its fifth straight day of gains
and remained near Monday's near three week peak of 82.841.
The dollar was down 0.2 percent at 97.56 yen, off
Monday's two-week high of 98.70 yen, with bids cited at 96.80
that could check the dollar's drop.
The euro surrendered gains and was last down 0.1 percent at
$1.3108, though it held Monday's low of $1.3058, its
weakest level since June 5.
"We could see the dollar consolidate here," said Ian Gunner,
portfolio manager at Altana Hard Currency Fund in London. "Not
only has the price action been a bit overdone but also the way
the market has interpreted the way tapering will be done. Such
tapering will be very data-dependent."
The IMF's chief economist Olivier Blanchard said on Tuesday
that Fed talk of exiting its stimulus could spur volatility on
global markets, adding recent movements had been exaggerated.
Volatility has jumped due to turmoil in Chinese markets,
which have been roiled by concerns about a potential money
market squeeze. In an attempt to calm nerves, China's central
bank said it would guide markets to reasonable rates.
"The dollar trend will remain very much in place... The
dollar will not only be supported by the Fed tapering debate but
if we see equity markets supported by Fed reassurance, that will
be dollar-positive," said Ian Stannard, head of European FX
strategy at Morgan Stanley in London.
Attention now shifts to the release of U.S. new home sales
data for May, scheduled for 10:00 a.m. EDT.