MW; Current account deficit narrows in third quarter
Swissie jumps after central bank maintains floor
By Deborah Levine and Polya Lesova, MarketWatch
NEW YORK (MarketWatch) — The dollar fell against the euro on Thursday, coming off its best level since January, as better data in Europe and the U.S., plus a solid Spanish debt sale, boosted investors’ willingness to move away from safe havens and back to the euro and stocks.
The biggest gainer among major currencies, however, was the Swiss franc, which rallied after the Swiss National Bank maintained the minimum exchange rate of 1.2 francs per euro.
The dollar index DXY -0.40% , which measures the greenback against a basket of six major currencies including the franc, fell to 80.176 from 80.538 in late North American trading on Wednesday.
The euro EURUSD +0.20% rose to $1.3037, up from $1.2986 Wednesday.
The dollar’s decline deepened after a U.S. report showed fewer Americans applied for unemployment benefits in the latest week. Read about jobless claims.
Separate data showed while wholesale prices rose last month, core prices — excluding food and energy — increased less than forecast, indicating less inflation pressure. See story on PPI.
Also boosting traders appetite for riskier assets, Spain managed to draw enough demand at its auctions of multiple securities to sell 6 billion euros in debt, nearly twice as much debt as the country set out to sell.
European stocks rose and U.S. Treasury prices fell, pushing yields up. Read about European stocks. See more on Treasury bonds.
Some analysts said the move was mostly driven by traders re-setting positions after Wednesday’s big move, which pushed the euro to its lowest level since January. That followed Italy’s bond auction, where borrowing costs surged to euro-era highs, indicating that last week’s summit had done little to alleviate the funding stresses that some governments face.
“It was inevitable that after yet another disappointing European Union summit outcome, the euro should feel some pressure, although it has taken the absence of major Middle Eastern and Chinese demand for the currency to see it fall,” said Mitul Kotecha, strategist at Credit Agricole.
“The sharp drop in the euro over recent days is finally beginning to reflect a foreign-exchange market coming to terms with reality,” Kotecha said.
Still, strategists said the euro is likely to continue declining further given the worsening economic picture across the euro zone and lack of a comprehensive solution to keep the debt crisis from engulfing larger economies that share the currency.
“Without the prospect of an imminent solution which might stop the rise of refinancing costs for Italy and Spain, the euro-dollar is likely to continue its journey towards the January low at $1.2860,” said strategists at Commerzbank. “Temporary recoveries of the euro are unlikely to be long lived.”
So far in 2011, the euro has lost 2.6%.
Swiss franc
The euro and the dollar slumped against the franc after the SNB defied calls from Swiss exporters to raise the exchange-rate floor to 1.25 francs per euro, noted Kathleen Brooks from Forex.com. Read story on Swiss franc, Swiss National Bank.
The SNB said the franc’s substantial appreciation over the summer has weighed on the Swiss economy. The bank said it’s ready to take further measures if the economic outlook and the risk of deflation so require.
“The bank may not want to wade in to protect the franc while the euro-zone crisis remains at such a critical level as this limits the chance of its success,” Brooks said. However, “as long as deflation risks remain a near and present danger, then increasing the euro/franc floor will be cards for the medium term,” she added.
The British pound GBPUSD +0.25% rose to $1.5511, up from $1.5473 late Wednesday.
The dollar also fell against the Japanese yen USDJPY -0.18% , to buy 77.80 yen, compared with ÂĄ78.08.
Deborah Levine is a MarketWatch reporter, based in New York.
Polya Lesova is chief of MarketWatch’s London bureau. Sarah Turner in Sydney contributed to this article.
