MW: Dollar extends slide against euro as stocks turn higher
British pound suffers as government debt increases
The U.S. dollar Wednesday deepened its loss against the euro after U.S. stocks -- a recently important marker for currencies -- rebounded on a surprise gain in housing prices, while the British pound plunged after the U.K. government said it planned to borrow more.
The euro rose to $1.3026, up from $1.2988 in early New York trading and a gain from $1.2944 late Tuesday.
"The euro is attempting a rally based on nothing objective other than feeling the benefit of reduced appetite for dollars as stocks rally," said Andrew Wilkinson, senior market analyst at Interactive Brokers LLC.
The Standard & Poor's 500 Index ) reversed higher in midmorning trading after the Federal Housing Finance Agency said a home prices index rose for the second straight month in February, though they still slipped 6.5% annually. Read more.
The surprise rise boosted stocks sentiment even after Morgan Stanley reported a big loss and slashed its dividend. See more on Morgan Stanley.
Since last year, the euro has tended to move in the same direction as equity markets, while the dollar and yen have held an inverse relationship with shares. That relationship is no longer as strong as in the past, however, with the dollar sometimes decoupling and declining as equities fall.
Absent any major economic releases, said strategists at Commerzbank in Frankfurt, the euro-dollar currency pair "will continue to take guidance from equities."
In a note, they forecast profit taking once the euro strengthened to $1.30.
The British pound dropped after Chancellor of the Exchequer Alistair Darling said the U.K. government plans to ratchet up public borrowing to a record level this year. See more on British budget.
The pound fell more than 1% versus the dollar to $1.4472, down from $1.4671 late Tuesday.
Before the budget, the Office for National Statistics reported that unemployment rose less than expected in March but still hit a 12-year high.
At the same time, government borrowing in March rose more than expected, putting the total for the recently completed fiscal year at 90 billion pounds ($131.6 billion). See full story.
The U.S. dollar was also down against most of its rivals.
The dollar index , a measure of the greenback against a trade-weighted basket of currencies, declined to 86.191, down from 86.483 in North American trade late Tuesday.
One dollar bought 97.92 yen, down from 98.63 yen late Tuesday. The yen rose as Asian equity markets posted a mixed session and Japanese exports declined, but at a slower pace.
