Forex - U.S. dollar soars on safe haven buying

Investing.com - The U.S. dollar traded higher against almost all of its major counterparts  Monday, as investor sentiment for the safety of the greenback was increased by doubts that this week’s European Union summit would yield much progress on tackling the region’s debt crisis.

During U.S. afternoon  trade, the dollar was higher against the euro, with EUR/USD dropping 0.56% to hit 1.2499.

Single currency sentiment soured amid growing doubts over whether European leaders will make any progress towards greater fiscal integration and allowing the bloc's rescue funds to buy government debt at a two-day summit meeting due to begin on Thursday.

Meanwhile, fears that the debt crisis in the euro area is creating a drag on global growth continued to weigh, following a string of data last Thursday which pointed to weak U.S. manufacturing activity, a shrinking Chinese manufacturing sector and slowing business activity across the single currency bloc.

Earlier Monday, Spain’s government formally requested aid of up to EUR100 billion for its banking sector from its euro zone partners. Spain’s economy minister said the amount should be enough to cover the needs of all banks and provide an additional security buffer.

The request came after the results of an independent audit last week indicated that Madrid would need a rescue package of as much as EUR62 billion to bailout its banks.

The greenback was also up against the pound, with GBP/USD slipping 0.16% to hit 1.5559.

Speculation over the possibility of more easing from the Bank of England continued after BoE policymaker David Miles said earlier that a "substantial" amount of monetary stimulus was needed to shore-up growth in Britain's "stalled" economy.

In an interview with the Financial Times, Miles reiterated his support for a GBP50 billion expansion of the central bank’s asset purchase program.

Elsewhere, the greenback was lower against the traditional safe haven yen, with USD/JPY tumbling 1.02% to hit 79.61, but extended gains against the Swiss franc with USD/CHF climbing 0.54% to hit 0.9606.

The greenback strengthened against its Canadian, Australian and New Zealand counterparts, with USD/CAD gaining 0.54% to hit 1.0301,AUD/USD falling 0.81% to hit 0.9982 and NZD/USD down 0.55% to hit 0.7860.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.30%, hitting 82.65.

In the U.S., official data showed that new home sales surged to a one-year high last month, indicating that the housing market may be gaining some momentum.

The Commerce Department said new home sales rose 7.9% to a seasonally adjusted 369,000 units in May, the highest rate since April 2010 and outstripping expectations for a gain of 0.6% to 346,000. New home sales for April totaled 343,000 units.

The median sales price of new houses sold in May was USD234,500.