By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar gained ground versus most major rivals on Tuesday, with the euro under renewed pressure a day after Moody’s Investors Service warned that France’s Aaa credit rating could be at risk.
A slower pace of growth in China and growing doubts about European leaders’ ability to deliver a comprehensive solution to the euro-zone debt crisis at a weekend summit also helped set the tone, strategists said.
The euro EURUSD -0.51% slipped to $1.3677 versus the U.S. dollar from $1.3741 in North American trade late Tuesday. The 17-nation shared currency fell to 104.90 yen versus the Japanese unit EURJPY -0.73% , down from 105.53 yen.
The dollar index DXY +0.37% , which measures the greenback against a basket of six major rivals, rose to 77.430 from 77.162 on Monday. The dollar tends to benefit from safe-haven flows when risk aversion is on the rise.
China’s economy grew at a 9.1% annual pace in the third quarter, slowing from 9.5% in the second quarter, government data showed Tuesday. The figure was below forecasts for growth of 9.2%. Read about China’s third-quarter GDP data.
“The risk rally is definitely running out of steam as high-beta currencies ran into their second straight day of liquidation sparked by weaker-than-expected GDP readings from China and continuing uncertainty over the efficacy of policy solutions that will be presented at an upcoming EU summit on the sovereign debt crisis,” said Boris Schlossberg, director of currency research at GFT.
Meanwhile, Moody’s warned late Monday that France’s Aaa rating, which remains on stable outlook, could eventually come under pressure amid the toll on the nation’s public finances as a result of the global financial crisis.
The British pound GBPUSD -0.13% fell to $1.5711 from $1.5757. The euro EURGBP -0.34% lost ground versus sterling to change hands at 87.01 pence, a loss of 0.3%.
Sterling extended its loss versus the dollar after the Office for National Statistics said annual consumer price inflation accelerated to a 5.2% rate in September from 4.5% in August, matching a record high set in September 2008. Economists had forecast a rise to 4.9%. Read Market Pulse about British inflation.
That leaves the inflation rate well above the Bank of England’s 2% target. But the central bank’s Monetary Policy Committee earlier this month kicked off a second round of quantitative easing amid expectations inflation will fall back sharply in coming months as temporary factors, such as an increase in the value-added tax, drop out of year-on-year comparisons.
“We could see inflation rise further in October, up to 5.4% or so, but thereafter it should all sharply. The VAT hike to 20% earlier this year will fall out of the annual comparison from January, while the weak growth environment suggests that rising inventory levels will encourage price discounting from corporates,” said James Knightley, an economist at ING Capital, adding that steep falls in commodity prices should add to downward pressure on inflation over the next year.
The dollar traded at ¥76.69 USDJPY -0.12% , down from ¥76.81 on Monday.
William L. Watts is a reporter for MarketWatch in Frankfurt.
