By Deborah Levine and Sarah Turner, MarketWatch
NEW YORK (MarketWatch) — The dollar gained Wednesday, taking back some ground lost in the previous session as traders turn sour on the euro ahead of a European Central Bank meeting and European auctions in the coming session.
The dollar index DXY +0.44% , which measures the greenback against a basket of six major currencies, rose to 81.265, up from 80.864 Tuesday.
The euro EURUSD -0.51% briefly slipped under $1.27, then lately traded at $1.2703, down from $1.2778 in late North American trading Tuesday.
The shared currency’s loss against the U.S. dollar extended after David Riley, head of sovereign ratings for Fitch Ratings, reportedly said the European Central Bank should step up purchases of troubled government bonds in order to save Italy and prevent a “cataclysmic” euro collapse. Read more on Fitch, ECB.
France, the No. 2 European economy, is expected to maintain its AAA credit rating, Fitch said Tuesday. Read more on Fitch comments,
The European Central Bank is holding its monthly meeting on Thursday, but analysts don’t expect change in interest rates or for officials to signal any other major policy.
But between simmering sovereign fiscal troubles and a regional economy that may fall into a recession, the central bank’s widely expected to lower rates later in the year and otherwise keep liquidity up through operations like the three-month loans to banks started last month. That’s what weakening the euro, said Paul Robinson, a strategist at Barclays Capital.
“Looser monetary conditions generally lead to a weaker currency unless offset by some other factor, and so it has proved in recent weeks,” he wrote in a note.
The central bank’s likely to next lower its benchmark rate in March, and the euro will fall to $1.20 in the next year, he said.
Also, economic data in the U.S. have been coming in stronger, providing more fundamental strength for the dollar, he said. Later Wednesday, the Federal Reserve will release its latest compilation of regional anecdotes, known as the Beige Book, detailing conditions in the U.S. economy, the world’s largest.
Also, traders may be re-establishing positions betting against the euro ahead of Spanish and Italian debt auctions scheduled for Thursday, said strategists at Brown Brothers Harriman.
The British pound GBPUSD -0.64% eased to $1.5439, compared to $1.5488 Tuesday.
Against the Japanese yen USDJPY +0.14% , the U.S. dollar turned up to buy ÂĄ76.99, from ÂĄ76.83.
