Euro on track for annual fall of more than 3% vs. greenback
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar was poised Friday to end 2011 with annual gains versus most major rivals other than the top-performing Japanese yen.
The dollar index DXY -0.12% , which measures the U.S. unit against a basket of six major rivals, traded at 80.458, up slightly from 80.425 in North American trade late Thursday.
For the year-to-date, the index is up 1.8%. The index rose 1.5% in 2010.
The euro EURUSD -0.17% , which slipped to a fresh 15-month low versus the dollar on Thursday, changed hands at $1.2937, down from $1.2949 late Thursday.
For the year, the euro is on track for a 3.3% loss versus the dollar, its second consecutive annual decline.
The euro has slumped as European leaders have failed to contain a two-year debt crisis that this year threatened to engulf Italy, the euro zone’s third-largest economy.
Recession likely in euro zone
Meanwhile, the 17-nation currency area is seen by economists as likely to move into recession.
Improving labor data and other economic indicators, however, have served to calm worries about a U.S. recession.
“So there is some hope for the world economy as the U.S. ends the year poking its head out of its midyear slump,” said Kathleen Brooks, research director at Forex.com.
“However, the question now is will U.S. economic buoyancy be enough to help Europe out of its misery, especially as weak peripheral nations try to boost exports, or will it slowly turn lower for another weak performance in summer 2012 like it did midway through 2011?”
The British pound GBPUSD +0.42% traded at $1.5464 versus the dollar, up from $1.5412 late Thursday. Sterling is down 1% versus the dollar since the beginning of the year.
The euro EURGBP -1.14% fell 0.4% against the British currency to trade at 83.70 pence. The euro has dropped 2.2% versus sterling over the course of 2011.
Supportive fund flows
The pound has been underpinned in recent months on “safe-haven” flows as the euro-zone crisis has deepened, noted Howard Archer, chief U.K. and European economist at IHS Global Insight.
But the currency’s upside is limited by Britain’s own weak economic fundamentals, he said.
The Bank of England in October resumed its asset-purchase program, the centerpiece of its quantitative easing strategy, in an effort to avert deflation.
“If euro-zone sovereign-debt turmoil continues or worsens, the pound is likely to [rise] further,” Archer said. “However, if there is a dilution of concern over the euro zone, then sterling is likely to come under increased pressure from a greater focus on the poor U.K. economic fundamentals.”
The dollar, meanwhile, slipped to 77.37 Japanese yen USDJPY -0.30% from ÂĄ77.63 on Thursday.
The dollar is down 4.6% versus the yen for the year so far.
The Australian dollar AUDUSD +0.34% traded at $1.0170 versus its U.S. counterpart, up 0.2% from Thursday but off 0.6% for the year.
William L. Watts is a reporter for MarketWatch in Frankfurt.
