MW: Dollar slips; euro trims gains on debt worries
Fitch sees significant risk of Italy credit downgrade
By William L. Watts and Michael Kitchen, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar lost ground versus most major rivals as investors showed increased appetite for risk, although the euro trimmed gains amid mounting worries over Greece and Italy.
The dollar index DXY -0.21% , which measures the U.S. unit against a basket of six rivals, slipped to 80.809 from 81.001 late Monday.
Commodity-oriented currencies, such as the New Zealand dollar and the Australian dollar, were boosted after China reported its trade surplus widened sharply in December to $16.52 billion. China’s trade surplus
The rise was attributable largely to a sharp fall in imports, which served to reinforce expectations Chinese authorities will move soon to loosen monetary conditions, said Adam Cole, global head of forex strategy at RBC Capital Markets.
Asian and European equity markets posted strong gains and stock index futures pointed to a higher start for Wall Street. Indications: Stock futures rise; Alcoa, China data in focus
The euro EURUSD +0.24% trimmed gains to change hands at $1.2780, up from $1.2765 in late North American trade Monday.
The shared currency was undercut after Citigroup Inc. Chief Economist Willem Buiter was quoted in news reports late Monday telling reporters in Dublin that Ireland should negotiate a second, standby bailout plan with the European Union and International Monetary Fund.
A European Union spokesman told reporters in Brussels Tuesday that it was “not helpful at this time to fuel speculation about a second program when the first one is delivering.”
Meanwhile, David Riley, head of global sovereign ratings at Fitch Ratings, said there was a significant chance of a downgrade for Italy in the absence of a credible financial firewall in Europe. Fitch’s Italy warning
“With little [economic] data on the calendar for the rest of the day, trading in the currency market is likely to be driven by equity flows. Stocks have bolted from their blocks as the year began registering gains every day so far,” said Boris Schlossberg, director of currency research at GFT. “If equities in the North American session can extend the rally from overnight risk FX should follow with AUD/USD eyeing the recent highs near $1.0390 while EUR/USD targets $1.2900.
CMC Markets analyst Michael Hewson said the euro would likely meet resistance at $1.2850, and “any overspill should be contained by the $1.3080 area.”
The Australian dollar AUDUSD +0.99% traded at $1.0333 versus its U.S. counterpart, a gain of 0.6%. The New Zealand dollar NZDUSD +0.96% rose 0.9% versus the greenback to fetch 79.53 U.S. cents.
The Swiss franc weakened versus the euro EURCHF +0.16% and the dollar USDCHF -0.07% , a day after Philipp Hildebrand’s abrupt resignation as chairman of the Swiss National Bank in the midst of a controversy over his wife’s currency trades. Swiss central banker quits amid controversy
The SNB on Monday said the resignation would have no impact on its policy of setting a cap on the value of the euro-Swiss franc cross. The central bank moved to weaken the franc last September, decreeing that the euro won’t be allowed to trade below CHF1.20.
The euro fetched 1.2134 francs, up 0.2%. The U.S. dollar rose 0.1% to 94.86 centimes. There are 100 centimes in a franc.
The Japanese yen firmed slightly, as the dollar USDJPY +0.01% eased to ÂĄ76.81 from ÂĄ76.87 Monday, while the British pound GBPUSD +0.11% rose to $1.5478, up from $1.5457.
