Consumer confidence sees dollar gain on euro

THE dollar gained for a fourth week in five against the euro, reaching the strongest since May 2004, on signs of strength in US manufacturing and higher consumer confidence.

The US currency also surged after the Federal Reserve raised its benchmark interest rate for a ninth straight time on June 30 by a quarter percent, to 3.25%, and suggested further increases are ahead.

“The interest rate markets in the US had not in our view fully discounted the magnitude of future Fed tightening,” said Robert Sinche, head of currency strategy in New York at Bank of America. “Combined with continued lacklustre growth throughout Europe, the stage was set for new dollar highs.”

The dollar advanced 1.1% last week to $1.1959.

The Institute for Supply Management’s factory index rose to 53.8 last month from 51.4.

Separately, the University of Michigan said its consumer confidence index rose to 96 in June, the first increase this year.

“We are seeing heavy, heavy dollar buying across the board,” said John McCarthy, a director of currency trading in at ING Financial Markets.