By Barbara Kollmeyer and V. Phani Kumar, MarketWatch
MADRID (MarketWatch) — The U.S. dollar dropped against most other major currencies Thursday, as European equities and U.S. stock futures rose after the prior day’s hefty sell-off linked to European debt worries.
The dollar index DXY -0.41% , a measure of the greenback’s performance against six other major global currencies, fell to 74.530 from 74.688 in late North American trade Wednesday.
The euro EURUSD +0.17% rose to $1.4241 from $1.4193. European stocks and the euro had fallen sharply Wednesday following unsubstantiated rumors that France’s credit rating could be downgraded. Sentiment appeared to have stabilized Thursday, with European stocks rising in morning trade.
“The trouble with August is that everyone thinks it‘s going to be quiet, but it‘s always the case that if liquidity gets low, you get these violent moves that tend to bring out the rumor mongers, but there’s a sense of calm today,” said Simon Smith, London-based chief economist at FxPro.
Sill, with global growth and European sovereign-debt worries persisting, investors haven’t got much appetite to short the dollar too much, he said.
“I don't think we’re going to see the dollar push massively lower, because we’re not in the same sort of risk-on/risk-off environment as we were in the previous two years when central bank liquidity was driving it,” Smith said.
U.S. stock futures pointed to a rebound for Wall Street, after a sharp tumble Wednesday. Read more about stock futures.
The dollar USDJPY -0.39% also fell against the Japanese currency, fetching 76.54 yen compared with ¥76.85 in late New York trading Wednesday.
The British pound GBPUSD -0.05% gained 0.2% to $1.6151.
Swiss franc falls further
In other currencies trade, the Swiss franc extended losses against the dollar and the euro, a day after the Swiss central bank announced additional measures to combat the franc’s strength. Read more about Swiss central bank measures.
Swiss National Bank Deputy President Thomas Jordan reportedly said in an interview with Swiss newspaper Tages Anzeiger that the country could legally peg the franc to the euro temporarily to stem its strength.
He said such measures to influence exchange rates are allowed under the Swiss mandate as long as they are consistent with price stability.
The dollar rose against the Swiss franc, with the U.S. unit USDCHF +1.53% changing hands at 73.77 centimes, up from 72.80 centimes. One hundred centimes make a Swiss franc.
David Watt, a senior fixed-income and currency strategist at RBC Capital Markets, said his reading of the Swiss National Bank’s communication Wednesday was that the bank hadn’t found a solution for stemming its currency’s rise amid economic and debt troubles in the U.S. and Europe.
“Still, the SNB is showing resolve, rather than sitting idle as the domestic economy risks getting steamrolled” from the gains in the franc, he said.
FxPro’s Smith said: “I think a lot of people are really thinking risk-reward wise, is it worth trying to push for more given the SNB seems keen to stand in the way of further gains? That’s why we’ve seen the Swissie come off quite a bit in the last 24 hours.”
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
