The euro also advanced versus the Japanese yen and the U.K. pound on speculation rising consumer prices will increase pressure on the European Central Bank to raise interest rates a second time this year. The pound dropped after a reports showed U.K. consumer confidence slumped to a record low while U.K. home prices declined the most in almost two decades this month.
The euro climbed to $1.5616 per dollar as of 6:52 a.m. in New York from $1.5576 yesterday. It also advanced to 168.92 yen, from 168.41. The U.S. currency was at 108.19 yen after reaching 108.33 yesterday, the highest since June 25. The euro may fall to $1.54 in three months, Stretch said.
The euro zone's consumer price index rose 4.1 percent in July, the biggest increase since April 1992, according to the European Union statistics office in Luxembourg.
The ECB, which aims to keep inflation just below 2 percent, raised its benchmark rate to 4.25 percent on July 3, the highest level since 2001. Council member Klaus Liebscher said on July 24 the bank has room to raise rates again even as growth falters. The euro rose to an all-time high of $1.6038 on July 15.
Traders raised bets the ECB will raise its benchmark rate by the end of the year, with the implied yield on the December Euribor futures contract ring 3 basis points to 5.05 percent.
The U.K. pound declined to 78.80 pence per euro from 78.59 after London-based market-research firm GfK NOP said its index of consumer confidence fell to minus 39 in July, the lowest since the data began in 1974. The average value of a home dropped 8.1 percent from a year earlier, the biggest decline since at least 1991, Nationwide Building Society, Britain's fourth-biggest mortgage lender, said today.
The euro has still fallen 0.9 percent versus the dollar this month amid speculation the Frankfurt-based ECB will hold off from raising interest rates as the risks from slowing economic growth outweigh those from accelerating inflation.
The U.S. dollar strengthened yesterday after ADP Employer Services reported that companies added 9,000 jobs in July after cutting a revised 77,000 positions in June. The report is a leading indicator of tomorrow's Labor Department employment data. Non-farm payrolls fell 75,000 this month following a drop of 62,000 in June, according to economists surveyed by Bloomberg.
The U.S. payroll report, which includes government hiring, has shown a reduction in jobs each month this year, while ADP has recorded only two declines.
The Federal Reserve yesterday extended an emergency-lending program for Wall Street firms through January after policy makers judged markets are still too weak to operate without a backstop from the central bank.