By James Ramage
The dollar rose against the euro to its highest level in nearly
a year on Friday after mostly upbeat economic data pointed to
stronger U.S. growth.
The euro dropped 0.3% to $1.3140, its lowest level since Sept.
6, 2013.
Measures for economic activity in the Midwest and U.S. household
sentiment both rose from one month earlier in August and beat
economists' forecasts. They overshadowed a report on U.S. spending
and incomes that came in below expectations.
The numbers compared favorably against mostly soft economic data
in the euro zone overnight, which arrived amid the backdrop of
increasing tensions in Ukraine. The European Central Bank has been
fighting low inflation and slow growth and is considering adopting
measures that would end up weakening the single currency.
Investors anticipate the ECB, which meets next week, will
announce some easing measures, in the form of further interest-rate
cuts or an asset-backed securities purchase program. The prospect
of even lower interest rates in the euro zone discourages investors
from holding euros, as they sap returns in assets denominated in
the currency.
The euro rose slightly on the dollar early in the Americas
session, only to drop midmorning.
"Investors still see the trend in the euro firmly to the
downside," said Omer Esiner, chief market analyst at Commonwealth
Foreign Exchange Inc. "So they will look at any strength in the
euro as an opportunity to sell at a higher level."
In addition, Mr. Esiner said, heightened geopolitical
uncertainty ahead of a long weekend discouraged investors from
holding euros. European leaders appeared ready to impose new
sanctions against Russia this weekend, as heavy fighting continued
Friday in Ukraine.
Monday is a holiday in the U.S., and trading volume is likely to
be reduced that day during the Americas session.
In other trade, the dollar gained 0.3% versus the yen, to
Y104.07, while the British pound slipped 0.1% against the dollar to
$1.6576.
Write to James Ramage at james.ramage@wsj.com