MW:Dollar weakens; court gives euro temporary boost
Euro remains above 1.20 francs day after SNB sets floor
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar traded lower versus most major rivals Wednesday, with the euro temporarily spiking higher after Germany’s top court rejected calls to block the country’s participation in euro-zone bailouts.
The dollar index DXY -0.44% , which measures the U.S. unit against a basket of six currencies, fell to 75.613 from 76.993 in North American trade late Tuesday.
A positive tone across equity markets in Asia and Europe, and gains by U.S. stock futures signaled stronger risk appetite, which tends to undercut the dollar and other currencies viewed as a safe haven.
The euro, which has been feeling renewed pressure over euro-zone sovereign debt worries, temporarily spiked higher versus the U.S. unit to trade above $1.41 after Germany’s Federal Constitutional Court upheld the country’s participation in last year’s Greek bailout and the establishment of the European Financial Stability Facility. Read Market Pulse on the court ruling.
The euro EURUSD +0.31% soon trimmed gains and traded in recent action at $1.4053, up from $1.3983 late Tuesday. The decision was expected. The court ruled that future bailouts must have parliamentary approval, which could significantly slow future rescue efforts.
Kit Juckes, head of foreign exchange at Societe Generale, said Scandinavian currencies are more likely than the euro to outperform the dollar, particularly since the Swiss National Bank moved Tuesday to extinguish the Swiss franc’s safe-haven status by imposing a floor on the euro-Swiss franc exchange rate.
Sweden’s Riksbank on Wednesday left its key rate unchanged at 2% and slowed its forecast for future hikes, but continued to project a rate of 3% in two years. That leaves the central bank on a tighter policy footing, making for a dramatic contrast with currencies controlled by central banks expected to ease rates, Juckes said.
The euro EURSEK -0.87% fell 0.8% versus th Swedish currency to 8.9706 krona per euro. The dollar USDSEK -1.18% fetched 6.3827 kronor, down 1.1%.
The European Central Bank on Thursday is widely expected to signal an end to its current rate-hike cycle. Read more on the ECB meeting.
The euro EURCHF -0.22% traded at 1.2056 francs versus the Swiss currency, down from CHF1.2055 late Tuesday. The euro posted its biggest one-day jump versus the Swissie since the launch of the shared currency in 1999 after the SNB announced it would impose and enforce a floor on the euro-Swiss franc exchange rate at CHF1.20.
The U.S. dollar fell 0.3% versus its Canadian counterpart USDCAD -0.30% to trade at 98.60 Canadian cents.
The Bank of Canada is widely expected to leave its key rate unchanged at 1% when it concludes its policy meeting Wednesday, analysts said.
Meanwhile, “the accompanying statement is likely to be considerably more dovish in light of the recent Canadian growth slowdown, as well as the dire growth developments in the rest of the G-7,” said Rob Carnell, an economist at ING Bank in London.
The British pound GBPUSD +0.27% traded at $1.6005 versus the dollar, up from $1.5938. The U.S. dollar USDJPY -0.64% changed hands at 77.15 Japanese yen, down from ¥77.69 on Tuesday.
