MW: Dollar’s gains on euro ebb; China growth in focus
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar held modest gains Tuesday amid worries over China’s growth outlook, but the currency reversed an advance against the euro while staying in its recent range.
The ICE U.S. dollar index DXY +0.15% , a measure of the greenback’s performance against six major currencies, stood at 79.527, off a high of 79.843 but up from 79.451 late Monday.
The euro EURUSD -0.03% slipped as low as $1.3171 and lately traded at $1.3243, from $1.3239 in late North American trading Monday. The single currency rose for the past three sessions.
Currency analysts noted that China moved to raise fuel prices and miners warned that Chinese demand growth could slow significantly, which weighed on global equities and pushed U.S. Treasury yields lower. Read more on China fuel prices.
“This move in the dollar is driven by renewed concerns about the global economy,” said Kathy Lien, director of currency research at GFT. “Throughout the global financial crisis, China did the heavy lifting for Asia and the rest of the world. Although the U.S. economy is improving, unfortunately we do not think that the U.S. has what it takes to offset slower growth in China.”
U.S. stocks declined, with the S&P 500 Index SPX -0.44% off 0.4%. Read more on U.S. stocks.
The rebound in the euro seemed technical in nature as traders may be covering their still-high number of bets against the euro, said Stewart Hall, senior fixed-income and currency strategist at RBC Capital Markets.
“Its tendency isn’t so much to move as lurch,” he said. “One minute you have these tight trading ranges that all of a sudden just give and take out a lot [of the] chart with them.”
The euro also extended gains versus the Australian dollar, as comments from major mining companies about the outlook for China also weighed heavily on the aussie, since its export-driven economy is so closely linked to China’s.
The euro EURAUD +1.06% rose 1.2% against the aussie to reclaim its highest level since early January.
Fed outlook
The dollar shrugged off the one piece of U.S. economic data, on housing starts, but traders will tune into a lecture that Federal Reserve Chairman Ben Bernanke will deliver starting at 12:45 p.m. Eastern time. It’s the first of four lectures at the George Washington School of Business.
“With a focus on monetary policy, Bernanke may drop some hints about QE3 and the need for more stimulus,” Lien said, referring to a third round of quantitative easing.
In the last week, the dollar has recovered since the Fed’s statement after its last policy meeting was interpreted as indicating the economy may not need another round of bond purchases. Quantitative easing tends to devalue a country’s currency.
