Dollar advances against euro and yen

THE US dollar advanced against the euro and the yen after an industry report showed prices paid by US manufacturers jumped last month and the economy’s services industries expanded at a faster pace.

Faster growth and inflation may bolster expectations the Federal Reserve will keep increasing interest rates to contain inflation as the US economy outpaces Europe’s for a fourth year. The dollar gained 4.6% versus the euro last quarter, the biggest gain since the first three months of 2001.

“The very strong rise in the prices-paid number is compounding worries about inflation,” said Mitul Kotecha, head of currency strategy in London at Calyon, a unit of Credit Agricole SA. “Interest rates have moved in the dollar’s favour in the past few months and it’s got some catching up to do.”