The dollar hit a two-month peak against its basket of peer currencies on Wednesday, boosted by robust U.S. housing data supporting the case for the Federal Reserve to raise interest rates in the near term, but fell back slightly.
The dollar index inched 0.1 percent lower to 95.503, after earlier rising as high as 95.661, one tick above the overnight high hit after data showed new U.S. single-family home sales surged to a more than eight-year peak in April and prices hit a record high.
While some short-covering emerged after the greenback's gains, many investors took a breather ahead of data and events in coming days, market participants said.
"People are taking a low profile today. Most people are just squaring positions ahead of the month-end," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. "The dollar's downside should be limited for now," he added.
The upbeat housing numbers backed the Fed's April policy meeting minutes, released last week, which hinted that the central bank may raise rates soon if the economy appeared strong enough.
"The dollar may need further incentives to challenge recent highs and climb yet higher. These fresh incentives could come in the form of more data due later this week, and Japan's stance on fiscal stimulus, which would in turn boost the Nikkei and improve risk appetite," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.
The dollar could take its cues over the next few days from data including U.S. initial jobless claims and pending home sales on Thursday, and Japanese inflation and U.S. first quarter GDP figures on Friday.
Fed Chair Janet Yellen is also due to speak on Friday, which is also the concluding day for the G7 summit being held in Japan.
China fixes yuan at weakest level vs dollar in more than 5 years
The People's Bank of China set its daily yuan-fixing at the weakest level against the U.S. dollar in more than five years Wednesday.
The so-called yuan fix was set at 6.5693, the weakest level against the greenback since March 2011, and 0.3% weaker than Tuesday's level of 6.5468. The figure serves as a reference point for the onshore yuan, which can trade 2% higher or lower than the PBOC's central reference rate.
The onshore yuan weakened 0.2% to 6.5642 afterwards, a three-month low, while its offshore counterpart, which trades around the clock in Hong Kong, was unchanged at 6.5677.
Analysts said the move reflected strength in the U.S. dollar overnight, after new-home sales rose at the fastest pace since January 2008.
Euro zone hails 'breakthrough' with Greece, IMF debt deal
The euro zone gave Greece its firmest offer yet of debt relief in what finance ministers called a breakthrough deal that won a commitment from the IMF finally to return to taking part in the bailout for Athens.
After talks that lasted into the small hours of Wednesday, the Eurogroup ministers gave a nod to releasing 10.3 billion euros in new funds for Greece in recognition of painful fiscal reforms pushed through by Prime Minister Alexis Tsipras's leftist-led coalition, subject to some final technical tweaks.
But a bigger step forward was a deal by which the euro zone agreed to offer Athens debt relief in 2018 if that is necessary to meet agreed criteria on its payments burden. That was enough to secure an agreement from the International Monetary Fund to again join the euro zone in funding the bailout of Greece.
"We achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance program," Eurogroup President Jeroen Dijsselbloem, the Dutch finance minister, told a news conference. "This is stretching what I thought would have been possible not so long ago."
Oil prices push closer to $50, U.S. crude hits highest in 7 months
Oil futures pushed closer to $50 a barrel on Wednesday, with U.S. crude hitting its highest in over seven months after industry data suggested a larger-than-expected drawdown in U.S. crude inventories last week.
Oil markets were also supported by an overnight surge in U.S. equities and strong home sales that could point to the Federal Reserve raising interest rates as early as June.
U.S. crude futures CLc1 had climbed 71 cents to $49.33 a barrel by 0652 GMT, after ending the previous session up 54cents. The benchmark earlier on Wednesday touched its highest since mid-October at $49.45.
Brent futures LCOc1 rose 65 cents to $49.26 a barrel, having ended the last session up 26 cents to snap a four-day slide.
Reference: Reuters, Nikkei Asian Review
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