By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch)—The dollar gained against the euro Thursday as peripheral euro-zone bond yields rose and Spanish workers staged a nationwide strike over austerity measures ahead of the government’s presentation of its latest budget plans.
Concerns about the prospects for an economic hard landing in China and the global growth outlook also continued to weigh on risk-oriented currencies.
The euro EURUSD -0.3254% bought $1.3277, down from $1.3326 in late North American trading Wednesday, sliding as Italian and Spanish 10-year bond yields pushed higher amid mounting nervousness over Spain’s budget plans.
The ICE dollar index DXY +0.15% , which measures the greenback’s performance against a basket of six major currencies, stood at 79.221, off from 79.253 late Wednesday.
The Japanese yen, the No. 2 weighted component of the dollar index, jumped against several currencies, pressuring the dollar index.
The British pound GBPUSD +0.1043% edged down to $1.5888 from $1.5895, adding to its 0.2% loss for the month. But for this year, sterling is still up 2.2% against the greenback.
With Spain’s 2012 budget to be delivered on Friday, major trade unions called a one-day strike in protest of additional austerity measures. Read about Spain’s budget, strike.
“If the budget delivers any negative surprises or is not considered sufficiently tough enough to rein in Spain’s budget deficit, then international investors could ditch Spain all together, which is negative in the long term,” said Kathleen Brooks, research director at Forex.com.
Meanwhile, the European Commission’s economic sentiment indicator for the 17-nation euro zone unexpectedly slipped, weighing on European stocks.
U.S. stocks declined in morning activity, reviving traders’ impulse to sell currencies considered more aligned with risky assets and buy so-called safe-haven currencies. Read about U.S. stocks.
“As far as the risk trade is concerned, the U.S. is very much acting as the global bulwark, in the midst of concerns about China and the early resumption of European worries currently mostly related to the Spanish budget that will not go away any time soon,” said Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank.
Also Friday, the euro failed to find support from a steeper-than-expected drop in German unemployment and the latest in a series of well-received Italian government bond auctions.
Analysts at Nomura Securities said the euro will fall to $1.28 by the end of the second quarter—a little better than previously forecast—and then down to $1.23 by the end of the year.
This month, the euro has declined 0.3%, cutting its year-to-date gain to 2.6%.
The dollar index is up 0.6% for March, though still off 1.2% so far this year.
Aussie, Japanese yen
The Australian dollar AUDUSD -0.6440% declined to $1.0343 from $1.0395 the previous day, near its lowest levels of the year. Read more on the Australian dollar.
This month, the aussie has dropped 3.7% against the U.S. currency, though it’s still up 1.3% this year.
The yen rose, not just as a traditional destination for safe-haven seekers but potentially as Japanese companies and investors may be selling foreign investments and repatriating profits as the’s fiscal year ends this month.
The dollar USDJPY -0.7381% fell to ÂĄ82.35 compared with ÂĄ82.78 late Wednesday. The euro EURJPY -1.0622% followed suit, dropping to ÂĄ109.33 from ÂĄ110.43.
“Risk aversion continues to be the main theme in the foreign-exchange market,” said GFT director of currency research Kathy Lien, referring to the yen.
Trading in the currency may also be swayed by discussions of raising the country’s sales tax to cut its deficit, though such a move risks slowing consumption and the economic recovery , analysts at Brown Brothers Harriman said.
So far this month, the dollar has advanced 1% against the yen, adding to the year’s 6.8% jump. The euro is up by 0.7% for March and by 9.4% so far in 2012.
