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(Bloomberg) — The dollar jumped to an almost eight-year high against the yen as economic reports suggested the U.S. is getting back on track after a slow first quarter.

The U.S. currency strengthened versus all 16 of its major peers after orders for capital equipment rose for a second straight month and purchases of new homes exceeded forecasts. The euro dropped to its lowest in a month as Greek Finance Minister Yanis Varoufakis blamed creditors’ insistence on additional austerity for an impasse on the release of financial aid.

“A lot of investors were expecting the U.S. dollar to come back into vogue and I think we’re seeing that now,” Bipan Rai, director of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said by phone from Toronto. “Part and parcel to a U.S. dollar recovery is incoming data, and we think that the incoming data needs to be strong to buttress those expectations that the Fed is going to hike this year.”

The dollar climbed 1.3 percent to 123.10 yen as of 5 p.m. in New York, the strongest level since July 2007. The U.S. currency gained 1 percent to $1.0873 per euro, having reached $1.0863 earlier in the day, its strongest since April 28.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 of its major peers, advanced 0.9 percent to 1,191.84, touching its highest this month.

Markets in Hong Kong, the U.K. and the U.S. reopened after being closed for holidays on Monday.

Durable Goods

The Federal Reserve is weighing incoming data for signs the U.S. economy is ready for higher borrowing costs, as policy makers consider when to raise rates for the first time since 2006.
Bookings for non-military capital goods excluding aircraft — a proxy for future corporate spending on new equipment — advanced 1 percent in April after a revised 1.5 percent gain in March that was larger than previously estimated, Commerce Department data showed Tuesday.

New home sales increased 6.8 percent to a 517,000 annualized pace, beating the 508,000 median forecast of 70 analysts surveyed by Bloomberg before the release.

That boosted dollar buying after better-than-forecast reports on inflation and housing starts last week lifted Bloomberg’s gauge of the dollar the most since 2011.

“It feels like the rally is back on, the durable goods adds to the improving data backdrop for the dollar,” said Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA. “Dollar-yen is moving higher so quickly because positioning was very light.”

Timing Rates

U.S. central bankers are considering the risk of raising rates prematurely against having to play catch-up if they wait too long, Fed Vice Chairman Stanley Fischer said in a speech in Israel on Monday. He reiterated that the decision to increase borrowing costs would be “data determined,” and a matter of “going from an ultra expansionary monetary policy to an extremely expansionary monetary policy.”
Fed Chair Janet Yellen said Friday it would be “appropriate” to raise rates this year if the economy improves.

“We’ve had a two-month correction to the downside to the dollar and I think that’s ended,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., said during a radio interview with Bloomberg Surveillance. On dollar-yen, “we’re approaching psychological, important levels that will convince more people that they can’t fight this dollar uptrend.” The 125 yen per dollar level is key, he said.

The dollar has gained 8.5 percent in the past six months against a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen rose 3.2 percent, while the euro fell 6.8 percent.

The shared currency lost ground as talks between Greece and its creditors on bailout funds needed to pay the International Monetary Fund almost 1.6 billion euros ($1.75 billion) next month made little progress, people familiar with the matter said.
–With assistance from Lukanyo Mnyanda in Edinburgh, Kevin Buckland in Tokyo and Andrea Wong in New York.

To contact the reporter on this story: Rachel Evans in New York at revans43@bloomberg.net To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Michael Aneiro