Forex - Dollar gains as new home sales numbers surprise on upside

The dollar rose against most major currencies on Wednesday after new home sales in the U.S. hit a five-year high in June, dampening expectations for the Federal Reserve to keep stimulus programs for a long period of time.

Stimulus programs such as the Fed's USD85 billion monthly bond-buying program tend to weaken the dollar to spur recovery, and talk of their dismantling — the product of improving indicators — can strengthen the greenback.

In U.S. trading on Tuesday, EUR/USD was down 0.22% at 1.3195.

The Commerce Department reported earlier that U.S. new home sales jumped 8.3% to 497,000 units, their highest level since May 2008.

Analysts were expecting new home sales to rise 1.8% to 482,000, which bolstered the dollar.

The numbers strengthened the dollar and erases some of the losses sustained earlier this week when the National Association of Realtors reported that existing home sales missed expectations

The euro, however, was up against the dollar earlier in the session after U.K.-based Markit Economics revealed that the euro zone purchasing managers’ index rose to 50.1 in July from 48.8 in June, beating analysts' calls for a 49.1 reading.

A reading above 50 signals expansion.

Germany’s manufacturing PMI rose to 50.3 from June's reading of 48.6, and the service-sector PMI jumped to 52.5, from 50.4.

The French manufacturing PMI rose to a 17-month high of 49.8 from 48.4 in June, while France’s services PMI improved to 48.3 from 47.2 last month.

Both French and German data beat market expectations, though the dollar regained steam in afternoon trading on Wednesday, especially as investors digested soft output data in China.

The preliminary reading of China’s HSBC manufacturing PMI fell to 47.7 in July from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6. A reading below 50 indicates a contraction.

The greenback, meanwhile, was up against the pound, with GBP/USDtrading down 0.36% at 1.5315.

The dollar was up against the yen, with USD/JPY up 0.80% at 100.25, and up against the Swiss franc, with USD/CHF trading up 0.30% at 0.9376.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.29% at 1.0318, AUD/USD down 1.50% at 0.9157 and NZD/USD trading down 0.85% at 0.7929.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.39% at 82.40.