British pound higher ahead of government’s budget statement
By William L. Watts and Virginia Harrison, MarketWatch
FRANKFURT (MarketWatch) — The dollar lost ground on Tuesday against most major rivals, with the euro extending a gain in the wake of an Italian bond auction despite a further rise in borrowing costs for the shared currency area’s third-largest economy.
The euro EURUSD +0.18% traded at $1.3395, up from $1.3307 in North American trading late Monday. The shared currency temporarily pushed above the $1.34 level after Italy sold 7.5 billion euros ($10 billion) of bonds, including a three-year benchmark, albeit at euro-era record-high yields.
The auction produced a three-year yield of 7.89%, a euro-era record, while sales of bonds maturing in 2020 and 2022 also produced records well above 7%.
“Nevertheless, Italy avoided crossing the key 8% barrier and was able sell the full allotment with bid-to-cover ratio of 1.5,” said Boris Schlossberg, director of currency research at GFT. “The fact that [euro/dollar] was able rally off such dubious results from the Italian auctions says more about the oversold conditions in the forex market than it does about the underlying strength of the currency.”
The results were credited with lifting overall risk appetite, with European shares and U.S. stock index futures trading higher. The risk-sensitive Australian dollar AUDUSD +1.20% gained 1.7% versus the U.S. unit to change hands at $1.0042.
Euro-zone finance ministers are set to meet Tuesday night in Brussels, which will be followed by a meeting of all European Union finance ministers on Wednesday.
“Headlines from European officials over the next couple of days will take precedence in driving the market’s momentum,” strategists at BNP Paribas said. “We remain cautious, as the market remains vulnerable to headline risk ahead with the euro-group meetings taking place over the next two days.”
The dollar index DXY -0.34% , which measures the performance of the greenback against a basket of six major currencies, fell to 78.668 from 79.236 in North American trading late Monday.
Against the Japanese yen USDJPY -0.25% , the dollar bought ÂĄ77.73, down from ÂĄ77.99 in North American trading late Monday.
The British pound GBPUSD +0.74% rose to $1.5626 from $1.5498 as investors awaited Chancellor of the Exchequer George Osborne’s autumn budget statement and updated budget figures from the independent Office for Budget Responsibility.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Virginia Harrison is a MarketWatch reporter based in Sydney.
