FX:Dollar broadly higher as Spain woes fuel safety demand
Forexpros - The U.S. dollar was higher against almost all of the other major currencies on Monday, as fears that Spain may require a full-scale bailout saw investors shun riskier assets in favor of the relative safety of the greenback.
During European morning trade, the dollar advanced to a two-year high against the euro, with EUR/USD down 0.44% to 1.2101.
Concerns over Spain’s finances intensified after the state of Murcia followed Valencia in requesting financial aid from Madrid over the weekend. On Friday, Spain’s government cut growth forecasts for 2013 and said the economy would stay in recession next year.
The yield on Spanish 10-year bonds rose to a record 7.53% Monday, well above the critical 7% threshold widely considered unsustainable in the long run.
In addition, fears over a Greek exit from the euro zone resurfaced, as Athens requested more time to meet the conditions of its international bailout ahead of a meeting with the Troika on Tuesday.
The greenback was higher against the pound, with GBP/USD losing 0.43% to hit 1.5553 and climbed to a 19-month high against the Swiss franc, with USD/CHF adding 0.47% to trade at 0.9925.
In contrast, the greenback was lower against the safe-haven yen, with USD/JPY down 0.57% to a seven-week low of 78.04.
Earlier in the day, Japanese Finance Minister Jun Azumi reiterated that Tokyo was ready to take decisive steps against speculative moves or excessive volatility in the yen, amid concerns over the impact on the country’s largely export driven economy from the stronger currency.
But the greenback was stronger against its Canadian, Australian and New Zealand counterparts, with USD/CAD up 0.38% to 1.0165, AUD/USD falling 0.90% to 1.0283 and NZD/USD down 1.15% to 0.7903.
The Australian dollar was little changed after official data showed that domestic producer price inflation rose 0.5% in June, outstripping expectations for a 0.3% increase, following a 0.3% drop in May.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.32% to 83.88.
Neither the euro zone nor the U.S were to release any significant economic indicators on Monday, so markets looked set to remain focused on developments in Europe.
