By Virginia Harrison, MarketWatch
SYDNEY(MarketWatch) — The dollar weakened against most major rivals during Asian trading hours Monday in the wake of a downgrade to the U.S. credit rating, while the euro gained on an expected intervention to support Italian and Spanish bonds.
Safe-haven currencies outperformed as global risk appetite dulled following the Standards & Poor’s ratings cut, with further downgrades possible.
The U.S. dollar index DXY -0.42% , which measures the greenback’s performance against a basket of six other major currencies, fell to 74.306, from 74.592 in North American trade late Friday.
Late Friday, S&P downgraded the U.S. long-term debt rating to AA+ from AAA with a negative outlook, meaning it can be lowered again within two years. Standard & Poor’s affirmed the U.S. A-1+ short-term rating. Read more about the U.S. debt downgrade.
The euro strengthened against the greenback after the European Central Bank signalled it will likely intervene in the bond market buy Italian and Spanish debt. Read more about the ECB bond buying.
“The European Centrals Bank’s statement left little doubt that we will see large-scale intervention on Monday. It would be very euro-negative if this does not eventuate,” said Sue Trinh, senior currency strategist at Royal Bank of Canada.
The euro EURUSD -0.55% rose to $1.4349, up from $1.4269 late North American trading Friday.
Against the yen, the greenback USDJPY -0.22% bought ¥77.84, down from ¥78.42, late Friday.
“As long as risk aversion will continue to make its presence in the marketplace, the Japanese yen could stand to gain more value,” said Andrei Tratseuski, a currency analyst at Forex Club.
“In order for the yen to lose some value, risk appetite needs to return to the market place, which can be achieved if the U.S. economic performance picks up and contagion fears will recede in the peripheral nations of the euro zone,” Tratseuski said.
Another safe-haven currency, the Swiss franc, continued to strengthen against the greenback, as risk-aversion gripped global markets.
The dollar USDCHF -0.57% bought 75.85 centimes, down from 76.53 centimes in late North American trade Friday. A Swiss franc equals 100 centimes.
Muted risk appetite also saw the Australian dollar AUDUSD -1.50% sold down, with the Aussie buying $1.0314.
Virginia Harrison is a MarketWatch reporter based in Sydney.
