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Dollar firms after upbeat US housing data

The dollar strengthened against other major currencies on Tuesday (Aug 19) after US data showed an encouraging surge in housing construction and inflation remained tame.

NEW YORK: The dollar strengthened against other major currencies on Tuesday (Aug 19) after US data showed an encouraging surge in housing construction and inflation remained tame.

US housing starts jumped 15.7 percent in July to the highest pace since last November, and building permits gained 8.1 percent. A slight 0.1 percent rise in US consumer prices in June month-over-month left the annual rate up 2.0 percent, a level the Federal Reserve's monetary policy makers have regarded as non-threatening.

Weak eurozone and British data earlier in the day already had spurred gains in the greenback. Eurozone exports fell 0.5 percent in June, narrowing the single-currency bloc's trade surplus to a sliver.

Britain's annual inflation rate slid to 1.6 percent in July from 1.9 percent in June, a much larger slowdown than analysts expected that put a possible Bank of England rate hike further into the future.

"The outlook for the US economy leaves a lot to be desired but at the end of the day, dimmer prospects abroad is making the dollar and US assets more attractive to foreign investors," said Kathy Lien of BK Asset Management.

She said the encouraging numbers on the US housing market would leave the Fed comfortable in its plan to exit its bond-purchase programme in October.

The dollar rally came ahead of Wednesday's release of the minutes of the last meeting of the policy-setting Federal Open Market Committee.

Analysts will pore over the minutes for signs of whether the FOMC might accelerate plans to raise its key interest rate, now expected in the second half of 2015. "If they contain a less dovish bias, we could see further gains in the greenback," Lien said.

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