May 28 (Bloomberg) -- The dollar reached a two-week high against the yen as a measure of U.S. durable goods orders unexpectedly increased, signaling the outlook for the world's biggest economy may improve.
Japan's currency touched a one-month low against the euro and the weakest since November versus the Australian dollar, dropping to the day's lowest levels as an earlier decline in crude oil spurred investors to buy higher-yielding assets funded in Japan's currency, a strategy known as the carry trade. The yen pared its drop as oil reversed its decline.
``There's room for the dollar to gain,'' said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank in New York. ``The U.S. data looks better, while the European data is disappointing.''
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The U.S. currency climbed to 104.71 yen at 11:59 a.m. in New York, from 104.24, and reached the strongest since May 14. The U.S. currency strengthened to $1.5627 per euro from $1.5691, paring its decline this year to 6.8 percent. The yen fell to 163.63 per euro from 163.58 yesterday, and touched the weakest since April 24.
Sweden's krona dropped 0.45 percent, the most since March 12, to 9.3485 per euro. A government report today showed retail sales tumbled in April by the most in three years.
Orders for U.S. durable goods orders excluding transportation equipment rose 2.5 percent in April, while the median forecast in a Bloomberg survey was for a 0.5 percent drop. Overall orders fell 0.5 percent, after a 0.3 percent drop in March, the Commerce Department said.
Calmed Nerves
Futures on the Chicago Board of Trade showed a 30 percent chance the Federal Reserve will raise its target rate by a quarter-percentage point to 2.25 percent on Sept. 16, up from 21 percent a week ago.
Crude oil for July delivery was little changed at about $129 a barrel, after earlier dropping as much as 2.2 percent to $125.96 a barrel on the New York Mercantile Exchange. That was the lowest since May 19. Futures reached $135.09 on May 22, the highest since trading began in 1983.
``A pull-back in oil prices has calmed some nerves,'' said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto.
The Japanese currency touched 100.80 per Australian dollar, the weakest since Nov. 14, from 99.91 yesterday.
In the carry trade, investors get funds in a country with low borrowing costs and invest where rates are higher, earning the difference. The risk is that currency moves erode the profit from the rate differential. Japan's benchmark rate is 0.5 percent, the lowest among major economies. Australia's is 7.25 percent.
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