By James Ramage
The dollar rose to a five-week high against other currencies
Tuesday as concerns over the debt crisis in Greece and tumbling
equities in China sent investors into assets they perceive as
safe.
The Wall Street Journal Dollar Index, which compares the U.S.
dollar against a basket of 16 currencies, gained 0.4% to 87.61,
heading toward its highest closing level since June 1.
The dollar gained 0.9% against the British pound, with one pound
buying $1.5464. The greenback traded flat versus the yen at
Yen122.60, halting a three-day losing streak. The Japanese currency
is also considered a haven asset.
The dollar pushed 0.4% higher against the common currency
Tuesday, with one euro buying $1.1011. The greenback had pushed the
euro as low as $1.0916 earlier in the session before the common
currency pared losses during the afternoon on reports that eurozone
leaders were discussing proposals to provide Greece with emergency
financing.
Investors had moved into the dollar over fears that a failure
for Greece and its creditors to reach a new bailout deal would push
the country closer to exiting the eurozone.
During the latest meeting of eurozone leaders, Greece sought a
deal that would secure interim financing until the end of the month
in exchange for passing budgetary measures that, in theory, Greek
voters had rejected in a referendum Sunday. News of the discussion
boosted the euro, said Brad Bechtel, managing director in Jefferies
FX Group.
"That's enough to move investors," Mr. Bechtel said. "We'll see
if there's any teeth to it; we've been whipped around by headlines
like this for months."
In addition, money managers grew nervous watching Chinese shares
fall further, despite the government's recent efforts to keep
prices from spiraling lower at a time when the economy and its
demand for commodities have been slowing. The Shanghai Composite
Index fell 1.3% to 3727.12 Tuesday. The index has fallen 28% from
its 2015 closing high of 5166.35, reached on June 12.
Tuesday's moves into the dollar illustrate the confidence of
traders and investors about the prospects of the U.S. economy and
the Federal Reserve's path for interest rates. The dollar soared to
multiyear highs against rivals over the second half of 2014 and
earlier this year as expectations for strong U.S. growth and higher
U.S. interest rates attracted investors at a time when other
developed-market economies battled slow growth and low prices.
Higher U.S. rates make the dollar more attractive to
yield-hungry investors. Investors believe the Fed is likely to
raise interest rates before other developed markets, even if the
timeline for the first increase moves into early 2016, said Lennon
Sweeting, a dealer at USForex, which helps U.S. corporations hedge
their currency exposure.
"The U.S. is one of the few economies that has experienced
stable growth over the last 12 months," Mr. Sweeting said. "There
have been misses in the numbers, but it's mostly stood out as an
island of stability in the global markets."
Write to James Ramage at james.ramage@wsj.com