Rise in U.S. sentiment weighs on dollar; euro up as ministers meet
By William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar pared gains Friday, pressured by a rise in U.S. consumer sentiment, while the euro edged higher after Treasury Secretary Timothy Geithner urged unity among European finance ministers to solve the region’s debt crisis.
The dollar index DXY +0.62% , which measures the greenback against a basket of six major rivals, stood at 76.418, down from 76.540 just before the consumer sentiment data but up from 76.259 in North American trade late Thursday.
A gauge of consumer sentiment rose to 57.8 in the preliminary reading for September after tumbling to a nearly three-year low 55.7 in August, according to Friday reports on the gauge from Thomson Reuters/University of Michigan. Economists polled by MarketWatch had expected a slight rise to 57.3. The bigger-than-expected rise dulled some investor interest in the dollar.
The change in consumer sentiment only reversed a “small part” of last month’s plunge, said Paul Dales, senior U.S. economist at Capital Economics: “The rise from last month’s near-record low was presumably driven by the stabilization in equity prices and a fading of fears that the U.S. economy was about to drop off a cliff, but confidence remains well below the 74.3 seen in May.”
Euro gains ground
Meanwhile, the euro turned higher against the greenback after Geithner, speaking on the sidelines of a two-day meeting of European finance ministers in Wroclaw, Poland, said that divisions between the European Central Bank and European governments were particularly damaging and that officials must avoid “loose talk” about dismantling euro institutions. Read more about developments at the ministers’s meeting.
The euro EURUSD -0.53% bought $1.3818, up from $1.3797 on Thursday.
“Markets will be expecting to see European leaders finally grasp the nettle of the crisis in Europe with something more tangible than just words and rhetoric,” said Michael Hewson, market analyst at CMC Markets UK, in a note.
Also Friday, a spokeswoman for Finnish Finance Minister Jutta Urpilainen said a resolution of the dispute over Finland’s demand for Greek collateral in return for Helsinki’s participation in the second Greek bailout agreed to by euro-zone leaders in July is unlikely on Friday, Dow Jones Newswires reported.
The 17-nation shared currency jumped Thursday after the European Central Bank, in coordination with other major central banks, announced it would provide additional, collateralized dollars to banks via three tenders designed to meet liquidity needs through the end of the year.
The action helped calm fears of an imminent dollar-funding crunch as banks grow wary of lending to each other amid fears over exposure to Greece’s sovereign debt.
“The problems surrounding the solvency of Greece haven’t gone away, despite various calls for euro bonds, and with the troika set to return to Greece on Monday, ministers will need to come up with more than words, or we’ll be back where we started on Monday,” said Hewson.
In other currencies trading Friday, the British pound GBPUSD +0.02% bought $1.5813, little changed from $1.5808 on Thursday.
Against the Japanese yen, the dollar USDJPY +0.19% traded at ¥76.69, also little changed from ¥76.67.
William L. Watts is a reporter for MarketWatch in Frankfurt.
