By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch)—A fragile calm in European bond markets allowed the euro to bounce back from earlier weakness Thursday, while currency investors continue to eye concerns about Spain’s banks and a political vacuum in Greece.
The ICE dollar index DXY -0.20% , which measures the greenback against a basket of six rivals, gained to 80.153, up slightly from 80.083 late Wednesday.
The euro EURUSD +0.2704% traded at $1.2954, virtually unchanged from late North American trading Wednesday. The euro had dipped as low as $1.2923 in earlier action, according to FactSet Research data.
“Pity the momentum/breakout trader! EUR/USD has clearly broken through the bottom of its trading range, through the level where stops were widely publicized and further selling expected,” said Kit Juckes, head of foreign exchange at Société Générale in London.
“The only caveat is the one we have been accustomed to for a long time: The bad news is so well known everyone is positioned for it. But anyone who did sell on a break ... through $1.30 or $1.2950 is likely to be feeling frustrated,” he said, in a research note. “There is nothing in the news flow to suggest we will go back up, but the lack of momentum is such that failure to break $1.29 this morning will see a correction.”
The dollar found support in earlier action after Chinese data showed a sharp drop in import and export activity during April. Read more on China’s trade data.
“The poor import number bodes ill for [gross domestic product] growth. It should be a wake-up call for policy makers to do more to stimulate domestic demand, and is likely to lead to further elevated fiscal spending and monetary easing,” said Dariusz Kowalczyk, strategist at Crédit Agricole.
Gains made earlier this week for the dollar came as investors weighed the chances that Greece would exit the euro following an inconclusive weekend parliamentary election that raised questions about political support for the country’s latest bailout package.
Also Thursday, the British pound GBPUSD +0.2365% traded at $1.6164, up from $1.6141 late Wednesday. The Bank of England, as expected, left its key lending rate unchanged at 0.5% and made no move to boost the size of its asset purchase program. Read about the Bank of England.
The Australian dollar AUDUSD +0.8265% rose to $1.0122, up from $1.0058 late Wednesday, after some strong employment data for April. Read more on jobs data
Against the safe-haven Japanese yen USDJPY +0.0577% , the dollar reached ¥79.73, up slightly from the ¥79.65 seen in late trading Wednesday.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
