The dollar strengthened against most major rivals on Wednesday as the euro came under pressure after Spain's bond yields surged above six per cent.

The ICE dollar index, which measures the US currency against a basket of six major currencies, rose to 79.841 from 79.672 the previous trading session.

Interest in the greenback was pared back slightly after a report showed sales of newly built homes in the US fell a touch in August, as demand remained at a two year high and prices jumped a record 11.2%.

Sales of new homes fell to an annual rate of 373,000 last months, figures from the Commerce Department showed.

The euro meanwhile fell to $1.2867 from $1.2898 previously, its lowest point in two weeks.

The spotlight turned to Spain on Wednesday as the nation's borrowing costs unexpectedly surged. Yields on 10-year government bonds surged a huge 32 basis points to 6.07%, a level that is considered unsustainable. It comes a day before Spain submits a new austerity budget.

Sentiment was further bruised after Spain's central bank gave a downbeat assessment of the rate of economic growth in the third quarter.

The euro also traded at two-week low against the yen on gears about unrest in Greece as protestors took to the streets against the government's austerity measures. The single currency fell 0.4% at ¥99.93.

Against the yen, the greenback fell to ¥77.71 from ¥77.78 on Tuesday.

Sterling fell to $1.6158 from $1.6187 the previous session while the Australian dollar bought $1.0342 from $1.0452 before.



CJ

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