Reserve will withdraw stimulus earlier than expected on signs the U.S. economic recovery is gaining momentum.The greenback reached the highest level in more than a month against the yen before reports this week forecast to show increases in U.S. personal spending and home sales. The Swiss franc was near its highest since March versus the euro, extending its advance past the 1.50 level that analysts had dubbed the central bank’s “line in the sand.”
The U.S. currency was at $1.4287 per euro in Tokyo from $1.4275 in New York yesterday. The dollar was at 91.43 yen from 91.17 yen yesterday. The yen was at 130.62 per euro from 130.18.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies including the euro, yen, pound and franc, gained 0.4 percent to 78.116 yesterday, near its three-month high of 78.141 set on Dec. 18. The index was little changed at 78.072 today.
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The Dollar Index’s 14-day relative strength index, or RSI, climbed above 70 yesterday, a level some traders view as a sign that a security may be poised to fall after gaining rapidly.
Futures trading in Chicago indicated a 46 percent chance that the Fed will increase its target rate for overnight lending between banks, currently between zero and 0.25 percent, by at least a quarter-percentage point by the June meeting, up from a 32 percent likelihood a month ago.
The Fed has begun using Treasuries and agency debt in reverse repurchase agreements this month to test a mechanism for unwinding unprecedented monetary stimulus, removing a total of $990 million in cash from the banking system in five operations since Dec. 3.
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