U.S. currency retreats against Japan’s yen after topping ¥80 level
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — Accelerating losses for U.S. stock index futures and European equities propelled the dollar mostly higher Tuesday, following Standard & Poor’s decision to cut the credit ratings of five Spanish regions as well as an earnings warning from U.S. chemicals firm DuPont.
The ICE dollar index DXY +0.36% , which measures the U.S. unit against a basket of six rivals, rose to 79.744 from 79.653 in North American trading late Monday.
The euro EURUSD -0.49% changed hands at $1.3013, down from $1.3047 Monday.
European equities and stock index futures posted hefty losses. Those markets extended declines after DuPont DD -5.55% reported disappointing third-quarter results, lowered its 2012 forecast and said it would cut 1,500 jobs worldwide over the next 12 to 18 months.
That in turn helped translate into gains for the dollar, which tends to find support on safe-haven flows when equities fall.
But strategists said downside potential for markets, and the euro, appeared limited.
“After the rebound late in the U.S. yesterday, the downside [for] European equities and of [the euro/U.S. dollar pair] might be rather well protected. Even so, we expect more range trading [by the euro] today and further out this week unless there is some high-profile news on global growth (e.g., Q3 growth in the U.S. or in the U.K.) or from Spain or Greece,” wrote strategists at KBC Bank in Brussels.
The downside for the euro is relatively safe, they said, but a break above technical resistance at $1.3140 and $1.3172 would be “difficult with no high-profile news,” they said.
The dollar bought 79.89 Japanese yen USDJPY -0.23% , little changed from ÂĄ79.91 in late North American trade. The dollar was unable to extend an earlier gain after breaching psychological resistance at the ÂĄ80 level, hitting an intraday high of ÂĄ80.005, according to FactSet data.
Expectations for further easing by the Bank of Japan have served to weaken the currency, which fell for eight consecutive days versus the dollar. A further decline by the currency on Tuesday would mark a ninth straight day of declines. The currency hasn’t seen a losing streak that long versus the buck since 2005, according to strategists at FxPro in London.
“Statistically, at least, there is a case for some yen weakness-reversal today. ... But the basis for a weaker yen, both technically and fundamentally, remains fairly solid so any reversal could be taken as a buying opportunity ... by the yen bears,” they said, in a research note.
Also Tuesday, the U.S. dollar rose 0.4% versus the Canadian dollar USDCAD +0.43% to 99.63 Canadian cents. The euro EURCAD -0.06% was steady at C$1.2953.
The Bank of Canada is expected to leave rates unchanged when it completes its policy meeting Tuesday, but many strategists expect policy makers to tone down language favoring higher interest rates.
Since such an event has been largely priced in, the Canadian dollar is likely to stabilize after knee-jerk weakness in response to the central bank’s policy announcement, wrote analysts at Commerzbank.
That said, a test of parity versus the U.S. dollar and the C$1.30 level versus the euro can’t be ruled out in the near term, they said.
The British pound GBPUSD -0.17% traded at $1.5984 versus $1.6008.
The Australian dollar AUDUSD -0.53% fetched $1.0274, down from $1.0302 late Monday.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
