TORONTO -- The dollar is broadly higher Wednesday morning after a weak performance by Chinese stocks contributed to a waning appetite for global risk.
Although it had retreated somewhat from its overnight gains as North American trading progressed, the dollar showed little response to news of weaker-than-expected U.S. durable-goods orders for June. Manufacturers' orders for durable goods decreased 2.5% last month to a seasonally adjusted $158.57 billion, the Commerce Department said.
The market's primary focus remained on the return of risk aversion that first surfaced on Tuesday and gained momentum in Asian trading Wednesday.
Currency strategists at Brown Brothers Harriman in New York said the dollar is enjoying a firm tone after a recent slide ran out of steam in North America.
"A firmer dollar with profit-taking in equity markets is consistent with the familiar pattern. However, what is noteworthy is that the dollar has retained its firmer bias despite a rally in European shares and a continued string of data, albeit second tier, suggesting the global economy is on the mend," BBH said.
U.S. stock futures were pointing to a lower opening.
"In the short term, the [dollar] looks to remain better bid," said a report from BMO Capital Markets in Toronto. "Once again it may be worth noting that with the way market sentiment has improved along with signs that the global economy is recovering, the market may be getting ahead of itself."
A report from TD Securities said weakness in Chinese equities has sent the foreign exchange markets scrambling for cover, lifting the dollar broadly as "safe haven" trades are favored once again.
"Commodity prices are weaker but the [Canadian dollar] and the [New Zealand dollar] are holding up relatively better than the [Australian dollar] against the generally stronger U.S. currency, which suggests a rather patchy response to the risk switch being flipped back to the 'off' position this morning," TD said.
In morning trading, the euro traded at $1.4098 from $1.4172 late Tuesday in New York and from a session low at $1.4087, according to EBS. It was also down at ¥133.63 from ¥133.99 after an initial fall to ¥132.80.
The dollar rose to ¥94.76 from ¥94.55, after touching a high at ¥95.12, and was up at 1.0818 Swiss francs from 1.0753 Swiss francs. The pound fell to $1.6395 from $1.6442.
The market is now looking toward the five-year Treasury auction later in the day to see if the take-up improves.
The downturn in sentiment started Tuesday as global equity markets started to top out after a recent strong rally was followed by the U.S. consumer confidence survey from the Conference Board showing a steeper-than-expected decline.
Although Japanese stocks appeared to have shrugged off the more negative news, with the Nikkei ending 0.3% higher on the day, there was a different story in China.
Despite a very successful initial public offering by China State Construction Engineering Corp., which sent the share price rocketing 70%, the Shanghai Composite Index lost a hefty 7.4% on the day as the market appeared to take talk of a possible tightening in monetary policy as an excuse to take profits on the 70% surge the market has seen this year.
European exchanges have been putting in a stronger performance Wednesday.
The Canadian dollar is moderately lower Wednesday morning as the currency also suffers from the general strength in the U.S. dollar. The Canadian unit recovered from its low in earlier trading, when the U.S. dollar reached a session high at C$1.0891, according to EBS.
BMO Capital Markets said that the longer-term outlook for the U.S./Canadian dollar pair remains unchanged, although some technical indicators suggest the next leg lower may not be as quick as the move of the last few weeks.
The U.S. dollar is at C$1.0860 from C$1.0835 late Tuesday.
