By Deborah Levine and Sarah Turner, MarketWatch
SAN FRANCISCO (MarketWatch) — The U.S. dollar was pressured against major currencies on Thursday after Spain said it would delay the release of its budget plan until later in the session, buoying the euro in the short term.
The ICE dollar index DXY -0.06% DXY -0.06% , which measures the greenback against a basket of six major currencies, recovered from lows after Spain’s announcement to trade at 79.772, down from 79.840 in late North American trading on Wednesday.
The euro EURUSD -0.04% edged up to $1.2871 from $1.2868.
Investors were slightly optimistic about the euro, and Spain in particular this week, where the day’s budget is just one of two key events expected out of the financially-distressed country. Read more on Spain's budget delay.
Spain’s delay isn’t helping much, said Christopher Vecchio, currency analyst at DailyFX. Still, “If it was bad, we’d have broken yesterday’s low.”
Just after Spain’s news, a trio of U.S. economic reports showed weekly jobless claims fell, durable-goods orders plunged last month and second-quarter gross domestic product was revised lower.
Regarding the GDP figures, “This report is yet another sobering note of caution regarding the pace of recovery in the third quarter,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.
Spain is expected to cut its budget deficit, on its own terms, enough to satisfy possible international creditors if it later asks for a bailout -- which investors fully expect. Read: What to expect in Spain’s budget.
Investors almost hope for a bailout, as that’s a prerequisite for the European central Bank to start buying the country’s bonds on the secondary market -- which is the reason Spain’s yields fell in the last few weeks.
There's a “a creeping hope that today’s Spanish budget proves a near-term circuit breaker,” said strategists at RBC Capital Markets.
“Leaks thus far suggest the budget will aim to satisfy possible conditionality imposed by a European Financial Stability Facility /European Stability Mechanism program, which has led to natural speculation that a formal request for at least an Enhanced Conditions Credit Line will soon be forthcoming,” they added.
Results of stress tests for Spanish banks are due Friday, as is a review of Spain’s credit rating by Moody’s Investors Service, with a downgrade of Spain’s debt to junk status a possibility.
To date, the Spanish government has held off requesting a bailout from its European partners.
The strategists also said that risk was given “a small fillip” after the Chinese central bank made a record injection of liquidity this week. Read more on PBOC money market move.
In other currency moves, the British pound GBPUSD +0.35% traded at $1.61229, from $1.6159.
Against the Japanese currency USDJPY -0.11% , the dollar declined to 77.68 yen, from ÂĄ77.72 in late trading on Wednesday.
The Australian dollar AUDUSD +0.47% advanced to $1.0424, from $1.0343.
Deborah Levine is a MarketWatch reporter, based in San Francisco.
Sarah Turner is MarketWatch's bureau chief in Sydney.
