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Dollar gains on strong U.S. housing, consumer inflation data

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Shutterstock photo - - The dollar traded higher against most major currencies on Tuesday after a fresh batch of U.S. housing indicators coupled with solid inflation reports kept expectations strong for the Federal Reserve to wind down stimulus programs this fall.

In U.S. trading on Tuesday, EUR/USD was down 0.32% at 1.3320.

The dollar firmed against the euro and most other currencies after the U.S. Commerce Department said that the number of building permits issued in July jumped 8.1% to 1.052 million units from June's total of 973,000. Analysts expected building permits to rise by 2.5% to 1.0 million units in July.

The report also showed that U.S. housing starts soared by 15.7% last month to hit 1.093 million units from June's total of 945,000, far past expectations for an increase of 8.6% to 969,000 units.

A separate report showed that the U.S. consumer price index rose 0.1% last month from June and 2.0% on year, both figures meeting estimates.

Core consumer prices, which exclude food and energy costs, inched up by 0.1% last month, missing expectations for a 0.2% gain, though the year-on-year rate came in at 1.9%, which met expectations.

On Monday, the National Association of Home Builders/Wells Fargo Housing Market Index increased to 55.0 in August, a seven-month high, from 53.0 in July, beating estimates for a reading of 53.0.

The data fueled market speculation that the Federal Reserve will close its asset-purchasing stimulus program in October and hike interest rates some time in 2015, which would allow the dollar to rise.

Waning fears that the Russian-Ukraine conflict will escalate also bolstered the greenback.

The euro, meanwhile, continued to come under pressure due to ongoing expectations that monetary stimulus programs in the U.S. will wind down at the same time the European Central Bank takes steps to loosen policy.

The dollar was up against the yen, with USD/JPY up 0.33% at 102.91, and up against the Swiss franc, with USD/CHF up 0.26% at 0.9090.

The greenback was up against the pound, with GBP/USD down 0.67% at 1.6616.

The pound weakened broadly earlier Tuesday after official data showed that the annual rate of inflation in the U.K. slowed in July, curbing expectations for an interest rate increase.

The annual rate of inflation slowed to a two-month low of 1.6% in July from 1.9% in June. Economists had expected inflation to tick down to 1.8%. U.K. consumer prices contracted 0.3% in July from June, worse than market forecasts for a 0.2% month-on-month contraction.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.51% at 1.0943, AUD/USD down 0.23% at 0.9304 and NZD/USD down 0.66% at 0.8420.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.38% at 81.941.

On Wednesday, the Federal Reserve is to publish the minutes of its latest policy meeting. offers an extensive set of professional tools for the financial markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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