Dollar index heads for quarterly gain of more than 5%
By William L. Watts and Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar gained against the euro on Friday on concerns European leaders won’t move as quickly as hoped to take additional steps to contain the ongoing debt crisis in the euro zone.
An intensification of the region’s sovereign debt crisis has put the euro on track to end the third quarter with a 7.4% loss versus the dollar.
The euro EURUSD -1.16% fell to $1.3430, down from $1.3584 on Thursday.
The dollar index DXY +0.63% , which measures the U.S. unit against a basket of major currencies, rose to 78.428, up from 77.917 in North American trade late Thursday. The index is on track for a quarterly gain of 5.8%, even as the Federal Reserve has implemented more easy monetary policy.
The British pound GBPUSD -0.01% slipped to $1.5582, from $1.5614 late Thursday.
For the quarter, the pound has lost 2.9% amid growing expectations that the Bank of England could resume its asset-purchase program, sometimes called quantitative easing.
“It’s been one hell of a third quarter, and the excitement of recent weeks is likely to continue over the next three months,” said Kathleen Brooks, research director at Forex.com. “We end the quarter no closer to a long-term solution to the European sovereign debt crisis, the Bank of England looks poised to do more QE, it could even be joined by the Fed at some stage and the global economic outlook is still a confusing picture.“
The dollar added to gains slightly as data on U.S. consumer spending, incomes and inflation weighed on equities, further reducing investors’ interest in assets deemed riskier. Read about U.S. spending data.
Despite some talk earlier this week that European officials were considering some big steps to ensure the risk of a default by Greece doesn’t cripple Europe’s banking sector and spread to other countries, public comments by officials show many key players are reticent to take such steps.
One option making the rounds in markets was hope that Europe would leverage the region’s rescue fund to provide more firepower.
German Economy Minister Philipp Roesler on Friday said German lawmakers were unlikely to back any further increase in the euro-zone rescue fund, the European Financial Stability Facility, beyond the measures approved in a key vote on Thursday.
“Through most of this week, euro shorts were reduced apparently on the hope that politicians may have adopted a new more urgent approach to finding a solution to the crisis,” said Jane Foley, senior currency strategist at Rabobank. “There is, however, little concrete evidence that this is the case.”
Parliament would be required to approve any further increase in the fund beyond its proposed 440 billion euro size ($597 billion).
“I don’t see any inclination there to change the ceiling yet again, or to increase the guarantees in some other way, for instance by leveraging,” Roesler told Germany’s ARD television, according to a Bloomberg report.
A larger-than-expected drop in German retail sales for August also weighed on the euro, while the European Union statistics agency Eurostat said annual inflation accelerated faster then expected in September. Read more on euro-zone inflation.
