By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The dollar traded mainly higher Monday, boosted versus the euro on renewed worries about the impact of the single-currency region’s ongoing debt woes.
The dollar index (DXY 78.42, +0.34, +0.43%) , a measure of the greenback against a basket of six major currencies, rose to 78.442 from 78.070 late Friday.
The euro initially gained ground on the dollar in Asian trading, boosted by weekend remarks by Chinese Premier Wen Jiabao.
“We hope that by intensifying cooperation with you, we can be of some help in your endeavor to tide over difficulties at an early date,” Wen said in a speech to the Greek parliament, according to The Wall Street Journal. “China will not reduce its euro-bond holdings and China supports a stable euro.” Read about Wen’s remarks.
The euro (EURUSD 1.3688, -0.0103, -0.7469%) fell to $1.3717 from $1.3784 in late New York trading Friday, while the British pound (GBPUSD 1.5837, +0.0033, +0.2088%) stood little changed, trading at $1.5839 from $1.5837.
Strategists said the euro’s swing lower was triggered by a combination of factors, including a further rise in Spanish unemployment that pushed the jobless total above 4 million as well as remarks by Joseph Stiglitz, the Nobel Prize-winning economist, that economic woes could endanger the euro.
In an extract published in the Sunday Telegraph newspaper of an updated edition of his book “Freefall,” Stiglitz said governments around the world may attempt to cut deficits too quickly, risking a double-dip recession in the process.
Meanwhile, the euro zone may not survive amid competitive tensions within the region, Stiglitz wrote.
“Despite all of the handwringing at the start of the week, the profit taking in the euro/dollar after a near-vertical rise over the past month is perfectly normal,” said Boris Schlossberg, director of currency research at GFT.
The euro scored a gain of 7.4% against the dollar in September, its biggest monthly rise since December 2008.
Speculating about the Bank of Japan
Against the Japanese yen, the dollar (USDYEN 83.3000, +0.0600, +0.0721%) gave up an early advance to trade at ¥83.22, down modestly from ¥83.31 late Friday.
While the Bank of Japan is “widely expected to leave its policy rate unchanged at 0.1%, it may announce further easing measures against the background of persistent [yen] strength,” said Mitul Kotecha, global currency strategist at Credit Agricole CIB in a note to clients.
While the risk that Japanese authorities will intervene in currency markets again may prevent the dollar from slipping further against the yen, “the market is increasingly testing the resolve of the Japanese authorities,” he wrote.
Strong dollar support is apparent around the ¥82.80 level, with the authorities “unlikely to allow a break below this technical level in the short term,” Kotecha said.
