By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar slipped versus most major rivals Thursday, with the euro finding some modest support as European bond yields declined in the wake of Spanish and French auctions.
The dollar index DXY -0.32% , which tracks the U.S. unit against a basket of major rivals, traded at 78.250, down from 78.345 in North American trade late Wednesday.
The euro EURUSD +0.52% changed hands at $1.3477, up from $1.3446.
The euro rallied against a broadly-lower dollar on Wednesday after the Federal Reserve teamed up with the European Central Bank and other major central banks to slash the cost of dollar swap lines in the face of rising dollar funding costs for European banks.
On Thursday, the euro temporarily traded above $1.3500 after Spain sold 3.75 billion euros ($5 billion) of government bonds, meeting its target, and France auctioned €4.3 billion of debt. Spain saw yields rise, but demand was solid. The French auction also saw strong demand, while yields were mixed, with 10-year borrowing costs falling.
“We are uncertain as regards the longevity of the sentiment improvement on the back of the central bank liquidity measures, but in terms of euro bond issuance, the relatively successful auctions in France and Spain have supported euro sentiment,” said Jeremy Stretch, currency strategist at CIBC in London.
Meanwhile, the purchasing managers index for the euro-zone manufacturing sector confirmed a further contraction in activity, highlighting expectations the region will move into recession, analysts said. Read about euro-zone manufacturing PMI.
The British pound GBPUSD +0.18% traded at $1.5726 versus the dollar, up from $1.5703.
The manufacturing PMI reading for Britain showed further contraction, but came in above expectations at 47.6. Meanwhile, the Bank of England released its second-half financial stability report, warning that the risks from the euro-zone debt crisis and the banking sector pose the biggest threats to the country’s financial stability.
The dollar rose to 77.69 yen USDJPY +0.08% versus the Japanese currency, up from ÂĄ77.53 on Wednesday.
William L. Watts is a reporter for MarketWatch in Frankfurt.
