Swissie, Japanese yen upside capped by intervention fears
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar gained ground versus major currencies on Thursday, finding support on safe-haven flows as growing fears about growth weighed on global equity markets and many commodities.
While the Japanese yen and Swiss franc typically outperform the dollar when investors reduce exposure to riskier assets, fears of intervention by authorities in both countries served to limit the room for gains, strategists said.
The dollar index DXY +0.64% , which measures the greenback against a basket of six currencies, rose to 74.379, up from 73.697 in late North American trading on Wednesday.
The euro EURUSD -0.75% sank to $1.4289, down from $1.4447 on Wednesday. The single currency fell by the most since Aug. 1.
The dollar extended gains as U.S. stocks plunged after the Philadelphia Federal Reserve’s manufacturing index dropped much more than forecast this month. Read about Philly Fed.
A separate report showed U.S. existing home sales fell in July.
The Dow Jones Industrial Average DJIA -3.52% lost more than 500 points following the report. Read about U.S. stocks.
Equities were under pressure earlier, with one of the main catalysts being a Wall Street Journal report saying that the Federal Reserve and state regulators are intensifying their oversight of U.S. subsidiaries of Europe’s biggest banks to measure how vulnerable the divisions are to increased financial pressures. Officials are worried the euro zone’s debt crisis could impair the banks’ ability to fund loans and meet other obligations in the United States.
“The dollar is firmer across the board against the majors as market sentiment continues to deteriorate amid concerns over the euro-zone banking sector,” said strategists at Brown Brothers Harriman.
Safe havens sidelined
The dollar gave up slight gains against the Swiss franc and was modestly higher versus the Japanese yen after the Philly Fed report.
The dollar USDJPY -0.18% bought 76.55 Japanese yen, compared to 76.50 yen Wednesday.
Against the Swiss franc, the dollar turned down to 78.84 centimes USDCHF +0.21% , from 78.89 centimes on Wednesday. One hundred centimes equal one Swiss franc.
“Fear of imminent intervention in both dollar/yen and euro/Swiss franc is trapping both in ranges and leaves the dollar the net winner against all of the other majors,” said Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets in London.
The euro reversed earlier gains against the Swiss franc, after climbing Wednesday when the Swiss National Bank announced additional steps to attempt to arrest the Swiss franc’s rise. Also, Switzerland’s government said it would provide aid designed to alleviate the impact of the currency’s strength on the economy. Read more about the SNB and the Swiss government.
The euro bought 1.1263 Swiss francs EURCHF -0.49% , down from 1.1400 on Wednesday.
The British pound GBPUSD -0.43% traded at $1.6447, down from $1.6564 late the previous day.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts is a reporter for MarketWatch in Frankfurt. Sarah Turner in Sydney contributed to this report.
