MW:Dollar rises more as Europe spurs risk aversion
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — The U.S. dollar rose further against the euro and various “risk currencies” Friday, as news updates on the ongoing European Union summit offered disappointment.
The dollar index DXY +0.20% , a measure of the greenback’s performance against six other major currencies, rose to 78.848 from 78.789 in North American trade Thursday, as investors chased assets perceived to be safe.
The dollar’s move higher came after reports that leaders of the 27-member European Union sealed a new fiscal pact for budget discipline, but failed to agree on a treaty change for closer fiscal ties. A deal may now just involve the 17 nations that share the euro, plus others who may want to join. Read more about the report.
Masanari Takada, forex strategist at Nomura Securities in Tokyo, said that coming on the back of the ECB decision the previous day, the news weighed down on the euro, and more heavily on other risk currencies such as the Australian and New Zealand dollars.
He said markets will watch Europe for further comments from European Central Bank President Mario Draghi, as well as from the region’s politicians.
“But we don’t think some good result will be [forthcoming],” Takada said.
The euro EURUSD -0.39% slipped to $1.3333 during Asian afternoon hours from $1.3347 late in U.S. trading Thursday.
The Australian and New Zealand currencies suffered steeper declines, with the Australian dollar AUDUSD -0.97% dropping to $1.0130 from $1.0203 earlier in the day. The New Zealand dollar NZDUSD -0.95% fell to $0.7685 from $0.7743.
“There had been high expectations ahead of this meeting. What has come out so far has disappointed those expectations,” said Mitul Kotecha, head of global forex strategy at Credit Agricole in Hong Kong.
The ECB had on Thursday cut its benchmark interest rate by 0.25 percentage points to 1%, as expected. But central-bank chief Draghi dashed hopes the ECB would step up purchases of bonds issued by euro-zone nations affected more severely by the debt crisis. Read full story on the ECB decision.
Among other major currencies, the U.S. dollar USDJPY +0.07% was purchasing 77.56 Japanese yen, down from ÂĄ77.67.
The British pound GBPUSD -0.24% was fetching $1.5615, down from $1.5652.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
