Dollar Trades at Three-Month High Vs Yen

The dollar traded at a three-month high against the yen as gaining stocks and declining crude oil brightened the outlook for the world's biggest economy.

The U.S. currency advanced a third straight day against the euro as the government said gross domestic product was stronger last quarter than initially estimated. The report spurred traders to step up bets the Federal Reserve will increase interest rates later this year, after cutting borrowing costs seven times since September.

The dollar traded at 105.50 yen at 6:01 a.m. in Tokyo, after rising 0.8 percent yesterday and reaching the highest since Feb. 28. The U.S. currency traded at $1.5521 per euro, after gaining 0.8 percent yesterday and touching the strongest since May 19. The yen traded at 163.73 per euro, after earlier this week touching 164.48 yesterday, the weakest since April 24.

Investors sold the yen and Swiss franc yesterday as falling oil encouraged so-called carry-trade bets, which involve borrowing where rates are low to buy higher-yielding assets elsewhere. The franc fell 1.1 percent to 1.0494 per dollar, the biggest drop among the 16 most-traded currencies. Japan's benchmark rate is 0.5 percent and Switzerland's target is 2.75 percent.

The dollar also got a boost after Dallas Fed President Richard Fisher said late on May 28 that the central bank will lift rates should consumers expect faster inflation.

The U.S. economy expanded at a 0.9 percent annual pace last quarter, faster than the Commerce Department's April 30 estimate of 0.6 percent, the government said yesterday. U.S. durable goods orders excluding transportation equipment rose 2.5 percent in April, the government said this week. The median forecast in a Bloomberg survey was for a 0.5 percent drop.

Dollar Trades at Three-Month High Vs Yen, Bloomberg
5/29/2008 2:42:02 PM