Dollar Climbs on Signs the U.S. Is Doing Better Than the Rest of the World

(Bloomberg) -- The dollar climbed Tuesday as investors snapped up American stocks and bonds, with concerns about the European economy helping to underpin appetite for the relative safety of the U.S. currency.

The Bloomberg Dollar Spot Index rose as much as 0.5 percent to the highest level since March 8 as the greenback advanced against all of its Group-of-10 counterparts except the Japanese yen, which is also often seen as a haven. The move came as better-than-anticipated U.S. corporate earnings helped drive the S&P 500 index of stocks above its highest-ever closing level, while benchmark equity gauges in Europe and much of Asia rose by less.

The dollar’s gain also follows disappointing data on European consumer confidence and comes ahead of U.S. growth figures this Friday that are predicted to show the economy humming along at an annualized pace of around 2.2 percent. The prospect of increasing divergence between the outlook for the U.S. and the rest of the world buoyed the greenback even as the market continues to price in interest-rate cuts from the Federal Reserve and Treasuries rallied. While the Fed has signaled that it doesn’t intend to hike this year, it’s seen as less dovish than many other global central banks, and there is a risk that current market bets for easing are dialed back.

The market pricing in a rate cut is “a little pessimistic,” said Brendan McKenna, a strategist at Wells Fargo & Co. in New York. If the data beats expectations, it may “cause a repricing in the market” and push sentiment about the Fed more towards neutral, rather than a rate cut.

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