Dollar Gains Against Major Counterparts On Rate Hike Bets

(RTTNews) - The U.S. dollar firmed against most of its major counterparts on Tuesday after stronger-than-expected housing starts and building permits data raised expectations for a rate hike by the Federal Reserve next month.

The Commerce Department's report showed new residential construction in the U.S. unexpectedly skyrocketed in the month of May.

The report said housing starts soared by 21.7% to an annual rate of 1.631 million in May after tumbling by 2.9% to a revised rate of 1.340 million in April. Economists had expected housing starts to edge down to a rate of 1.400 million from the 1.401 million originally reported for the previous month.

The report said building permits also surged by 5.2% to an annual rate of 1.491 million in May after slumping by 1.4% to a revised rate of 1.417 million in April.

Building permits, an indicator of future housing demand, were expected to rise to a rate of 1.423 million from the 1.416 million originally reported for the previous month.

Investors are now pricing in a 71.9% chance of a 25 basis point increase at the Fed's next meeting in July.

Traders look ahead to congressional testimony by Federal Reserve Chair Jerome Powell, for additional clues about the outlook for rates after the Fed signaled further rate hikes last week.

Powell is due to testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.

The dollar index, which climbed to 102.79 after the release of housing starts and building permits data, later dropped to 102.53, up just slightly from the previous close.

Against the Euro, the dollar firmed to 1.0893 before paring some gains. The dollar is currently trading at 1.0918 against the Euro.

The dollar is trading at 1.2766 against Pound Sterling, gaining from 1.2794. Against the Japanese currency, the dollar is weak, fetching 141.43 yen a unit, compared with 141.99 yen a unit on Monday.

The dollar has strengthened to 0.6788 against the Aussie, firming from 0.6853. Against Swiss franc, the dollar is firm at CHF 0.8979, and up against the loonie as well, gaining about 0.2% at C$1.3233.