India's rupee led declines among the currencies of the biggest emerging-market economies as the Federal Reserve signaled a reduction in stimulus is still on track, spurring a wave of cash to flow back into larger nations.
The Bloomberg US Dollar Index rose for a second week and touched its highest level since August 2. An equally weighted basket of currencies of Brazil, Russia, India, China and South Africa touched its lowest level versus the dollar since June 2010 on concern a paring of stimulus under the Fed's quantitative-easing strategy would intensify outflows from the currencies. The Commerce Department may report August 30 that US consumer spending increased 0.3 per cent in July.
"What we've been seeing is this clear-out of emerging- market positioning and back into the Group of 10," Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc's RBS Securities unit, said in a telephone interview. "The core -- the US, UK and Euro zone -- seem to be the largest beneficiaries of that."
The dollar rose 1.2 per cent to 97.72 yen this week in New York. The US currency fell 0.4 per cent to $1.3383 per euro. Europe's 17-nation common currency rallied 1.6 per cent to 130.10 yen. The Bloomberg US Dollar Index, which tracks the greenback against 10 major peers, climbed 0.4 per cent to 1,026.15.
Minutes of the July 30-31 Federal Open Market Committee meeting released this week showed policy makers were "broadly comfortable" with Chairman Ben S Bernanke's plan to taper purchases this year if the economy strengthens, with a few saying a reduction may be needed soon.