By William L. Watts, MarketWatch FRANKFURT (MarketWatch) — Hurricane Sandy menaced the U.S. East Coast Monday, sparking modest, haven-related dollar buying in thin trade as market participants braced for the potential devastation from the storm. The ICE dollar index DXY +0.31% , which measures the unit against a basket of six major rivals, traded at 80.252 in recent action, up from 80.046 in North American trade late Friday. “Sandy’s imminent arrival in the U.S. has provided a mild risk-averse mood in markets. The dollar is stronger, U.S. Treasury yields lower, equity markets softer,� said Kit Juckes, head of foreign exchange at Société Générale in London. “An early close and skeleton-staffed teams in the Northeast promise thin markets but that does not mean prices won’t move: The stronger dollar tone may pick up momentum for little reason,� he said, in a note. Data showing a stronger-than-forecast 0.8% gain in U.S. consumer spending in September also helped the greenback. U.S. stock markets will remain closed Monday and possibly Tuesday. U.S. stock index futures trading will close at 9:15 a.m. Eastern, while a trade group has recommended that fixed-income trading halt at noon Eastern. See: Hurricane Sandy forces U.S. markets to close . Jitters about Europe have done little to aid risk appetite. The euro EURUSD -0.37% changed hands at $1.2901, down from $1.2937. Silvio Berlusconi, Italy’s former prime minister, threatened over the weekend to withdraw the support of his allies from the government and launch a new political party after he was convicted by a Milan court Friday of tax evasion. “Overall, we think that the three parties currently supporting [Prime Minister Mario] Monti’s government—PD (center-left), PDL (center-right) and UDC (center)—will continue to do so as early elections would probably favor small and anti-European forces,� wrote economists at Barclays. “That being said, with the electoral campaign unlikely to be a cakewalk, political uncertainty might affect Italian paper’s performance,� they said. The euro has proved sensitive to shifts in peripheral bond markets, rebounding from its 2012 low as Spanish and Italian yields—and yield premiums demanded to hold Spanish and Italian debt over German paper--fell sharply in the wake of European Central Bank President Mario Draghi’s late-July pledge to do “whatever it takes� within the bank’s mandate to save the euro. The yield on Italy’s 10-year government bond IT:10YR_ITA +1.87% rose 0.07 percentage point to 4.97%, according to electronic trading platform Tradeweb. The British pound fetched $1.6058, compared with $1.6095 late Friday. The dollar bought 79.58 Japanese yen USDJPY -0.05% , down from around ¥79.63 Friday. William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.

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