Thursday, August 31, 2006

U.S. Dollar Climbs Against Euro, Yen

(08-31) 13:24 PDT NEW YORK, (AP) --

The dollar rose against the euro and yen Thursday after Washington released generally upbeat data and the European Central Bank hinted at an upcoming interest rate hike.

The euro bought $1.2806 in afternoon New York trading, down from $1.2829 in New York late Wednesday. The dollar also strengthened against the Japanese currency, climbing to 117.33 yen from 117.13.

The British pound, however, edged up to $1.9041 from $1.9035 late Wednesday.

The Commerce Department reported Thursday that consumers boosted their spending in July by the largest amount in six months. Incomes also rose, reflecting stronger wage growth.

Meanwhile, a separate report showed that orders to American factories dropped by 0.6 percent in July, the biggest decline in three months.

Earlier on Thursday, the ECB left its key refinancing rate unchanged at 3 percent Thursday. However, bank President Jean-Claude Trichet then pledged "strong vigilance" on inflation — wording that on previous occasions has signaled a rate rise is a month away.

Higher interest rates boost a currency by making some classes of securities more attractive to international investors.

The dollar was boosted by a two-year campaign of rate rises by the Federal Reserve, but that came to a halt in August. Amid uncertainty over its future course, the currency is sensitive to economic data that might offer pointers.

The markets are looking ahead to the Labor Department's report on non-farm payrolls Friday.

The yen suffered Thursday from disappointing Japanese industrial output data, which fueled speculation that the Bank of Japan would delay raising interest rates. The dollar climbed to a six-week high of 117.47 yen before slipping back.

In other trading, the dollar bought 1.2305 Swiss francs, up from 1.2284 late Wednesday, 1.1046 Canadian dollars, down from 1.1095.

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