U.K. pound, Japanese yen keep dollar index under pressure
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar turned back down against the euro Monday as U.S. stocks waver and traders hash through reports that European officials are weighing a broad plan to ensure a default by Greece wouldn’t spread contagion to the euro zone’s banking system or to other sovereigns.
The euro EURUSD -0.24% turned up to $1.3515, from $1.3493 in North American trading late Friday.
The dollar index DXY -0.04% , which measures the U.S. unit against a basket of six major currencies, turned back down to 78.151, compared to 78.378 late Friday.
The dollar also fell against the next two biggest components of the index: The British pound and Japanese yen.
Sterling GBPUSD +0.32% rose to $1.5565 from $1.5441 Friday.
The dollar USDJPY -0.11% fell to buy 76.39 yen from ¥76.62, and was still near its record low. It fell as low as ¥76.19.
British newspapers over the weekend said officials are considering a three-pronged plan that would allow for a Greek default, recapitalize the region’s banks and use leverage to massively ramp up the firepower of the European Financial Stability Facility beyond its 440 billion euro ($592.2 billion) war chest. Read more about European debt outlook.
“Although this plan is lacking details and we still need to find out how it would be implemented and agreed by all the euro-zone nations, it is a step in the right direction,” said Kathleen Brooks, research director at Forex.com.
Strategists said the weak track record held by European officials in addressing the 18-month-old crisis could make any rallies short-lived.
“These suggestions are still at the trial-balloon stage, as concerns about sovereign downgrades, European treaties and debt monetization persist,” said Kit Juckes, head of foreign exchange at Societe Generale, in a note. “Market participants can’t help thinking Europe’s leaders simply fail to grasp the seriousness of the situation and are looking for any bounce by the euro (or other high-beta assets) to re-set shorts.”
Analysts also note the first hurdle is for the existing agreement to be approved by several countries’ lawmakers, who are voting on it this week.
U.S. stocks recovered early gains, with the Standard & Poor’s 500 Index SPX +0.94% lately up 0.8%. Read about U.S. stocks.
While lower in the Asian session, the Australian dollar AUDUSD -0.33% pared losses to buy 97.50 U.S. cents, from 97.55 cents.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts is a reporter for MarketWatch in Frankfurt. Michael Kitchen in Los Angeles contributed to this report.
