By Richard Leong
NEW YORK (Reuters) – The dollar rose against most major currencies on Wednesday, hitting an eight-year peak against the yen on expectations the Federal Reserve would raise interest rates later this year on signs the U.S. economy is recovering from an anemic first quarter.
The euro recovered from a one-month low versus the greenback following reports that Greece and its creditors had made progress toward a deal that would unlock cash for the debt-laden nation and avert a default.
The dollar’s gains were also fed by automatic sell orders for the yen, which had traded in a relatively tight range versus the greenback, traders said.
“We broke out of a technical pattern because of the general dollar strength,” Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co. in New York, said of the Japanese currency.
Japanese Economics Minister Akira Amari said earlier on Wednesday that while recent movements reflected the dollar’s gains rather than the yen’s fall, excessive currency moves were undesirable. Those comments echoed earlier signals from Japan’s finance ministry and the Bank of Japan.
Traders brushed off Amari’s comments, with the dollar touching an eight-year high of 123.875 yen on the EBS trading system. It last traded up 0.6 percent at 123.840 yen <JPY=EBS>, bringing its year-to-date gain to 3.5 percent.
The euro’s bounce against the dollar was modest, however, as European officials downplayed speculation a Greek debt accord was near.
“All those comments have to be taken with a big pinch of salt, but it’s helping there are signs we are moving toward a deal,” said Charles St. Arnaud, currency strategist at Nomura Securities International in New York.
The euro fell earlier on a revived view that the U.S. currency would push toward parity in step with the European Central Bank’s plan to accelerate its bond purchases for its 1.1 trillion euro quantitative easing program.
The euro was last up 0.2 percent at $1.08925 after touching a one-month low of $1.0819 earlier on the EBS platform. It was near a 3-1/2-month peak two weeks ago.
Renewed enthusiasm in the greenback boosted the dollar index <.DXY> to 97.775, its highest level in more than a month. It was last up 0.1 percent at 97.371.
Tuesday’s better-than-expected U.S. data on core business spending, new home sales and consumer confidence failed to renew bets the Fed would end its near-zero rate policy at its June policy-setting meeting, but supported the notion the U.S. central bank would do so by the end of 2015, analysts said.
(Additional reporting by Patrick Graham in London, Hideyuki Sano in Tokyo, Ian Chua in Sydney; Editing by Tom Heneghan, W Simon, David Gregorio and Paul Simao)