By William L. Watts and Virginia Harrison, MarketWatch
FRANKFURT (MarketWatch) — The euro edged higher versus the U.S. dollar Thursday, as investor optimism showed signs of revival after Germany and France vowed to stand behind Greece and as Spain found solid demand in a bond auction.
The euro EURUSD +0.25% traded at $1.3801, up from $1.3756 in North American trading late Wednesday.
The dollar index DXY -0.35% , which tracks the greenback against a basket of six other currencies, slipped to 76.557, down slightly from 76.825 late Wednesday.
“Markets are coming round to the realization that Greece is not going to default this month or next (and probably not the one after),” wrote Elsa Lignos, senior currency strategist at RBC Capital Markets in London.
But others said the words of support offered by German Chancellor Angela Merkel and French President Nicolas Sarkozy after a conference call Wednesday with Greek Prime Minister George Papandreou are unlikely to do more than buy some time as policy makers wrestle with the ongoing debt crisis.
“Verbal reassurances from European leaders these days are much like counterfeit notes — of little real value,” said Michael Derks, chief market strategist at FxPro in London. “Europe’s sovereign debt and banking crisis worsens by the day and its leaders are still unable to come up with a coherent plan to stabilize the situation.”
Attention’s turning to a weekend meeting of European Union finance leaders that will also be attended by U.S. Treasury Secretary Timothy Geithner.
The shared currency also found support from Spain’s auction of non-benchmark 10-year bonds, which attracted strong demand, strategists said. Read Market Pulse about the Spanish auction.
The euro traded at 1.2063 Swiss francs EURCHF +0.15% , up 0.2%.
The Swiss National Bank on Thursday left its key lending rate at zero percent and reiterated it would buy unlimited amounts of foreign currencies to maintain a floor on the euro/Swiss franc exchange rate at CHF1.20.
Analysts said the franc saw little lasting impact from UBS AG CH:UBSN -8.78% disclosing that a rogue trade had resulted in a $2 billion loss. Read story about UBS’s trading loss.
The British pound GBPUSD +0.15% rose to $1.5804, up from $1.5777 late Wednesday. U.K. August retail sales fell 0.2% in August, matching forecasts.
Against the Japanese yen, the dollar USDJPY +0.01% slipped to ¥76.61 from ¥76.67.
The Australian dollar AUDUSD -0.07% was flat versus the U.S. unit, trading at $1.0282.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Virginia Harrison is a MarketWatch reporter based in Sydney.
