Swiss franc and euro gain; quake upends New Zealand dollar
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar turned slightly lower on Tuesday, pulling back following comments from a European official that raised prospects for an interest-rate hike by the European Central Bank.
The Swiss franc, in turn, was the recipient of flows from investors looking for a safer haven as turmoil in Libya sent oil soaring and dented overall investor appetite for assets and currencies deemed more risky to own.
A deadly earthquake in New Zealand and news that Moody’s Investors Service had lowered its outlook on Japanese sovereign debt to negative from stable also contributed to safe-haven demand in early action that supported the dollar, strategists said.
The dollar index (DXY 77.72, +0.03, +0.04%) , which measures the U.S. unit against a basket of six major rivals, stood at 77.719, off from a high of 78.326 earlier and versus 77.739 late Monday in European trading.
U.S. markets were closed for a public holiday on Monday, but currency trading took place in other countries.
The euro (EURUSD 1.3674, +0.0003, +0.0219%) turned up to $1.3679, from $1.3666 late Monday.
The shared currency’s rebound was tied to remarks by Yves Mersch, chief of Luxembourg’s central bank. In an interview with Bloomberg, Mersch said the European Central Bank might toughen its language on inflation next week.
“Mersch’s hawkish tone gave the euro a much-needed lift at a time when safe-haven demand was helping both the dollar and the Swiss franc,” said Michael Derks, strategist at FxPro. “Helped by some solid buying from sovereign wealth funds, the euro has recovered a lot of the ground it lost overnight against the dollar.”
Meanwhile, the dollar won no support from a report showing U.S. home prices fell in December by more than some analysts expected, weighing on hopes for recovery in the largest global economy and for the possibility of rate increases from the Federal Reserve. The U.S. central bank has to balance the outlook for growth and inflation expectations. Read about Case-Shiller home prices.
The euro remained 0.5% lower against the Swiss currency (EURCHF 1.2858, -0.0087, -0.6719%) , changing hands at 1.2851 francs.
The dollar (USDSWF 0.9401, -0.0062, -0.6553%) also fell against the Swiss franc, down 0.8% to buy 93.96 centimes.
The British pound (GBPUSD 1.6157, -0.0065, -0.4006%) remained lower at $1.6155, down from $1.6221 Monday.
As for the Japanese yen, the dollar (USDYEN 83.1300, +0.0100, +0.0120%) pared losses to stand at ¥83.11 against ¥83.18 late Monday. The yen had been down earlier as investors reacted to Moody’s downgrade of Japan’s ratings outlook. Read more on Moody's, Japan.
The New Zealand dollar (USDNZD 1.3101, -0.0071, -0.5390%) fell 1.7% to buy 1.3326 New Zealand dollars, in the wake of a major earthquake.
The quake, with a magnitude of 6.3, shook Christchurch, New Zealand’s second-largest city, on Tuesday, killing more than 60 and destroying buildings. Read about New Zealand earthquake.
The quake caused markets to reduce expectations for rate hikes by nearly a full quarter of a percentage point, weighing on the currency, according to strategists at Brown brothers Harriman.
The New Zealand dollar shed 0.6% versus its Australian counterpart (AUDNZD 1.3363, +0.0150, +1.1353%) to trade at A$1.3384. The Australian dollar (AUDUSD 1.0025, -0.0068, -0.6737%) fell 0.3% to $1.0031.
