Swedish central bank hikes rates, Australia stands pat
By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar was higher versus most major rivals on Tuesday, gaining ground against the euro after a round of lackluster European economic figures.
The dollar index DXY +0.23% , which measures the performance of the greenback against six other currencies, traded at 74.481, up 0.3% from Monday when U.S. markets were closed for the Independence Day holiday.
The euro EURUSD -0.41% slipped to $1.4469, down 0.4% from Monday.
The final June purchasing managers index reading for the 17-nation euro zone fell to a 20-month low of 53.3 from 55.8 in May, coming in below a preliminary estimate of 53.6. A reading of more than 50 indicates growth in activity.
Separately, the European Union‘s statistics agency Eurostat reported that May retail sales in the euro zone saw a 1.1% monthly decline versus forecasts for a 0.8% fall.
“Although the [European Central Bank] is expected to hike rates by 25 basis points at this Thursday’s governing board meeting, the latest data from the region suggests that growth has slowed significantly and may force [ECB President Jean-Claude] Trichet and company to reevaluate any further tightening for the rest of the year,” said Boris Schlossberg, head of currency research at GFT.
Also Tuesday, the Financial Times reported that the ECB plans to continue accepting Greek government bonds as collateral for loans provided at least one major ratings agency doesn’t declare the country to be in default.
The ECB declined comment on the story. Economists said the report underlines expectations the central bank would take whatever measures are necessary to maintain crucial funding to Greek banks in the event Greece does fail to repay debt. Read “ECB unlikely to walk away from Greek banks.”
The British pound edged higher versus the dollar GBPUSD +0.25% to trade at $1.6105, up 0.2%. The June PMI reading for the British services sector remained below trend but unexpectedly ticked up to 53.9 from 53.8 in May. Economists had forecast a reading of 53.5.
The Swedish krona was mixed after Sweden’s central bank, as expected, raised its repo rate by a quarter of a percentage point to 2%.
“We continue to expect the Riksbank to deliver consecutive rate hikes to 2.75% by year-end but admit that the likelihood for a Riksbank pause has increased as the international outlook is less optimistic” in the second half, wrote analysts at SEB in Stockholm.
They expect the euro to continue to lose ground versus the Swedish currency “but at a very moderate pace and short term we may see some profit-taking after the rally higher versus the euro seen in the last week.”
The euro EURSEK -0.28% was down 0.3% versus the Swedish unit to trade at 9.0716 kronor.
On Tuesday, the Reserve Bank of Australia left its key cash rate on hold at 4.75%. The Australian dollar AUDUSD -0.33% traded at $1.0700, down from $1.0719 on Monday after the decision.
The greenback USDJPY +0.33% gained against the yen, buying ¥81.11 Tuesday, up from ¥80.80 in the previous session.
