Thursday, Jun 17, 2010
By Bradley Davis
Of DOW JONES NEWSWIRES
(In the story "=WORLD FOREX: Euro Slips, But Loss Tempered By Recovery Hopes", published Thursday, June 16, at 4:35 p.m. EDT, the U.S. dollar index level was misstated. A correct version follows.)
NEW YORK (Dow Jones)--The euro fell against the dollar Wednesday but optimism over the economic recovery tempered its decline.
Positive sentiment about growth, bolstered by better-than-expected U.S. manufacturing data, put a floor under the euro and other riskier currencies, such as the Australian dollar, even as worries again flared that the euro-zone debt crisis would infect the region's financial sector. Those concerns pushed the euro down from its two-week high at $1.2354 seen in Asian trading.
Late Wednesday, the euro was at $1.2311 from $1.2348 late Tuesday, according to EBS via CQG. The dollar was at Y91.42 from Y91.40, while the euro was at Y112.56 from Y112.86. The U.K. pound was at $1.4737 from $1.4814. The dollar was at CHF1.1297 from CHF1.1323.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 86.142 from 85.934.
Currencies were generally trapped in a "holding pattern," as investors cast a nervous eye toward the lingering issues of euro-zone sovereign debt, said Matthew Strauss, currency strategist at RBC Capital Markets in Toronto.
Worries about the euro zone's debt woes focused on Spain, with risk premiums on Spanish government debt widening to record levels over German bonds, considered the safest government debt in Europe. That's even as both the European Union and the Spanish government denied persistent chatter that Spain, which is struggling with high deficits at a time of soaring unemployment, may have to tap the E.U.'s rescue fund.
The widening risk premiums could pose a problem for Spain's planned EUR3.5 billion sale of longer-term debt Thursday. The higher yields that have been demanded for stressed euro-zone bonds "hint at building dangers," Scotia Capital analysts said.
Yet despite the Spanish woes, the common currency has remained fairly resilient, said BBH analysts. Because the euro held above $1.2250, its recent recovery "would appear to remain intact," said Brown Brothers Harriman analysts.
To see the euro's performance against the dollar, please see:
http://dowjoneswebservices.com/chart/view/4135
While the euro has bounced from last week's bottom at $1.1876, the lowest level since March 2006, "euro-zone sovereign-credit concerns are "checking the euro's recent advance and perhaps suggesting that the rally may struggle to extend much more," said analysts at TD Securities in Toronto.
Investors are concerned the sovereign-debt crisis could infect the region's financial sector. Earlier this week, the president of large Spanish bank Banco Bilbao Vizcaya Argentaria SA warned that "international capital markets are closed for most Spanish companies and financial institutions."
With the ICE Dollar Index strengthening, Deutsche Bank's PowerShares U.S. Dollar Index Bearish exchange-traded fund was down 0.24% from late Tuesday, while its PowerShares U.S. Dollar Index Bullish was up 0.32%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of the ICE's Dollar Index.
-By Bradley Davis, Dow Jones Newswires; 212-416-2654; bradley.davis@dowjones.com
(Frances McInnis in New York contributed to this article.)
(END) Dow Jones Newswires
June 17, 2010 11:32 ET (15:32 GMT)
