Investing.com - The dollar rose against most major currencies on Wednesday after data on new U.S. homes sales came in much better than expected and put to rest concerns the Federal Reserve may slow the pace at which it tapers monetary stimulus programs.
Stimulus programs such as the Fed's $65 billion in monthly bond purchases tend to weaken the dollar by driving down interest rates, sending investors to stocks with hopes that corporate investing and hiring results from rising equity prices.
In U.S. trading on Wednesday, EUR/USD was down 0.41% at 1.3688.
The Commerce Department reported earlier that new home sales jumped 9.6% to 468,000 units in January, blowing past market expectations for a 1% decline to 400,000.
New home sales in December were revised up to 427,000 units from a previously reported 414,000 units.
The numbers renewed perceptions that a wave of soft factory, jobs and other economic indicators hitting the wire this year reflected rough winter weather that disrupted commerce and not an underlying softening of demand.
Investors were looking ahead to testimony by Federal Reserve Chair Janet Yellen on Thursday for insight as to whether or not the U.S. central bank will maintain the current pace of its cuts to monthly bond purchases.
Markets were expecting that Yellen will echo past statements that the U.S. monetary authority will continue rolling back its asset purchase program, as long as the economy improves as expected.
The Fed is currently buying $65 billion in Treasury and mortgage debt a month to suppress interest rates to spur recovery, which weakens the dollar as a side effect.
Markets largely ignored a report showing that Germany’s forward-looking Gfk consumer sentiment index ticked up to a seven-year high of 8.5 for March from 8.3 in February, indicating that the recovery in the euro area’s largest economy is gaining steam.
Elsewhere, the dollar was up against the yen, with USD/JPY up 0.16% at 102.40, and up against the Swiss franc, with USD/CHF up 0.45% at 0.8908.
The greenback was up against the pound, with GBP/USD down 0.10% at 1.6666.
In the U.K. earlier, the Office for National Statistics reported that gross domestic product increased by 0.7% in the three-month to December, unrevised from the preliminary estimate and in line with forecasts, which gave the pound some support against a firming greenback.
On a year-over-year basis, the U.K. economy expanded by 2.7% in the fourth quarter, down slightly from the preliminary estimate for 2.8% growth.
The largest contributors to fourth quarter growth were household spending, business investment and net trade, the ONS said. Business investments were revised up 8.5% from the same period a year earlier.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.33% at 1.1120, AUD/USD down 0.65% at 0.8961 and NZD/USD down 0.28% at 0.8306.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.32% at 80.43.
On Thursday, the U.S. is to release data on durable goods orders, a leading indicator of production, and the weekly report on initial jobless claims.