Thursday, Aug 11, 2011
By Anusha Shrivastava
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The euro strengthened Thursday as negative euro zone headlines were unable to dent risk sentiment and the rally in the U.S. equities markets provided a boost.
Early in the day, the Swiss franc plunged against the euro and the dollar with rampant speculation that Switzerland would resort to dramatic measures to weaken its currency. Some even suggested Switzerland could take the drastic step of pegging its currency to the euro, which itself has been hurt by Europe's sovereign debt crisis.
"By pegging the franc to the euro, Switzerland would repeat the mistake that China has made by pegging the Yuan to the dollar," said Peter Schiff, chief executive officer of brokerage firm Euro Pacific Capital. "Such a move would add to global imbalances, deny investors an important safe haven currency, and place an unfair tax on the Swiss people who will no longer enjoy the benefits of a strong currency."
As the day progressed, the rally in the U.S. stock markets took center stage as the Dow gained nearly 500 points.
For Friday, market participants are pegging hopes on stronger data to keep the mood buoyant. July's retail sales figures and the University of Michigan's consumer sentiment data will be posted, providing some indicators for the U.S. economy.
"It is difficult to gauge swings in the risk complex at this time and on Friday, we could extend this move if the data are positive," said Dan Katzive, director in the FX strategy research team at Credit Suisse in New York. "The market has not shown a lot of persistence. Market sentiment is very sensitive to headline risk and data so it could be hurt by adverse headlines."
Late Thursday, the euro was at $1.4241 from $1.4178 late Wednesday, according to EBS via CQG. The dollar was at Y76.83 from Y76.86, while the euro was at Y109.29 from Y108.966. The U.K. pound was at $1.6230 from $1.6130. The dollar was at CHF0.7620 from CHF0.72660.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 74.636, unchanged on the day.
Currency markets are also waiting to see if the Bank of Japan will intervene and some expect a fresh round of yen selling by the central bank soon.
The BOJ last week spent around $52 billion buying dollars against the yen in an effort to cap the currency's appreciation, but the move failed to have a lasting impact as global economic growth concerns and heightened fiscal worries in the U.S. and Europe spurred investors to seek shelter in safe-haven currencies like the yen.
-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com
- Javier E. David contributed to this report
(END) Dow Jones Newswires
August 11, 2011 17:03 ET (21:03 GMT)
