MW:Dollar slips; euro takes Spain downgrade in stride
By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — The dollar lost a little ground versus major rivals Thursday as rallying equities robbed the currency of haven-related flows and investors took a downgrade of Spain’s debt rating to near-junk status in stride amid expectations it might prompt Madrid to request a long-anticipated bailout.
The dollar index DXY -0.41% , which measures the greenback against a basket of six rivals, edged down to 79.859 from 80.058 in late trading the previous session. On Wednesday the index moved over the 80 mark for the first time in a month.
At the same time, the euro EURUSD +0.38% recovered a touch to trade at $1.2924 compared with $1.2869 recorded in late trading Wednesday, when Spain was downgraded to one notch above junk by ratings firm Standard & Poor’s.
“We think the announcement has hurt the euro as much as it is going to though, given: (1) no important levels in the ratings table were crossed and (2) the downgrade arguably marginally raises the likelihood that Spain will request a rescue sooner rather than later, which would fulfill one of the necessary conditions for the [European Central Bank] to begin bond buying,” said Chris Walker, currency strategist at UBS. See: S&P downgrade may nudge Spain bailout .
A bigger issue surrounds Moody’s continuing review of Spain’s credit rating. The S&P move put its rating on the same level as Moody’s. A decision by Moody’s to cut its Spain rating to junk may pose a much greater risk to the shared currency, Walker said.
The British pound GBPUSD +0.22% edged up to $1.6041 from $1.6003 late Wednesday.
The Australian dollar AUDUSD +0.36% traded at $1.0269, up from $1.0229, after jobs figures for September showed a larger-than-expected rise in the country’s jobless rate but also showed a bigger-than-expected increase in the number of employed.
Against the Japanese currency USDJPY +0.20% , the dollar rose to 78.37 yen from ÂĄ78.19.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
