MW: Dollar’s up, euro’s down on debt worries, data
Poor German bond auction undercuts the shared currency
By William L. Watts and Michael Kitchen, MarketWatch
FRANKFURT (MarketWatch) — The dollar mostly gained ground Wednesday, with the euro slumping to a six-week low against the U.S. unit after a weak German bond auction underlined fears that Europe’s debt crisis has infected the core of the euro zone.
The euro EURUSD -0.84% changed hands at $1.3390, down from $1.3513 in late North American action Tuesday.
The dollar index DXY +0.69% , which tracks the greenback against a trade-weighted basket of six other currencies, rose to 78.849 from 78.252 late Tuesday.
While it hasn’t been uncommon for auctions of German government bonds to go technically uncovered, forcing the Bundesbank to pick up the slack, poor demand at a sale of 10-year bunds on Wednesday was enough to send an already-weakened euro sliding, strategists said. Read more: Poor German auction shows crisis hitting core.
The results punctuate “the lack of appetite for Europe in general [and] suggests that if even Germany cannot attract buyers, then the structural negatives are even worse than we thought,” said Jeremy Stretch, currency strategist at CIBC in London.
CIBC remains bearish on the euro in the short term, he said, with an initial target at $1.3346 versus the dollar.
Early weakness for the euro was triggered by a Belgian newspaper report that a Franco-Belgian bailout plan for lender Dexia SA BE:DEXB +6.70% had proved unworkable. That triggered worries France would be forced to dig deeper, adding to worries about its AAA credit rating, strategists said.
And purchasing managers index for the euro zone indicated private-sector activity in the region continued to contract in November, while overall risk appetite was hurt by a surprise contraction in Chinese manufacturing, according to the preliminary HSBC Purchasing Managers Index.
Other major currencies losing ground to the dollar included the British pound, Japan‘s yen and the Australian dollar.
Sterling GBPUSD -0.45% fell to $1.5569 from $1.5637,while the dollar USDJPY +0.32% advanced to 77.20 yen from ¥77.00 Tuesday.
The Australian dollar AUDUSD -1.13% fell by a larger margin, losing 1.2% to 97.30 U.S. cents.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles.
