By Myra P. Saefong and William L. Watts, MarketWatch
An earlier version of this story had incorrect data on the ICE dollar index.
SAN FRANCISCO (MarketWatch) — The dollar index edged lower Tuesday and the euro was little changed against the greenback as traders digested data showing an increase in German investor sentiment and an auction of Spanish government debt that saw higher borrowing costs as well as strong demand.
The ICE dollar index DXY -0.13% , which measures the greenback against a basket of six currencies, fell to 79.436 from 79.530 late Monday. It touched a high of 79.764 earlier Tuesday.
The dollar index was mixed on strength in the Canadian dollar especially, “and a bit from the euro side of the pair,” said Richard Hastings, macro strategist at Global Hunter Securities.
The euro EURUSD -0.0837% traded at $1.3142, down from a high of $1.3173 and compared with $1.3141 in late North American trading Monday.
In Germany, the Center for European Economic Research said its ZEW gauge of expectations among investment professionals rose for a fifth consecutive month. The April index rose to 23.4 from 22.3, defying forecasts for a decline to 20.0.
“We think the stability in the ZEW survey came from strength in some of the euro area countries, especially on the export sides — even Spain had decent export activity,” said Hastings. “This is beneficial to the total euro-zone trade story and to the German export sentiment indicators. We see the trouble showing up in the import data in Spain and Greece, and a bit in Italy, too.”
Spain, meanwhile, managed to sell more than 3 billion euros in short-term bills, but borrowing costs rose from a March auction, reflecting the hit that Spanish debt has taken in recent weeks amid mounting worries over the country’s fiscal and economic outlook.
“A steady drift lower for EUR/USD was arrested and fully reversed as data surprised to the upside and Spain saw healthy demand for 12- and 18- month bills (covered 2.9 and 3.8 times, respectively), though yields of 2.6% and 3.1% are arguably less healthy,” said Adam Cole, global head of foreign exchange at RBC Capital Markets.
But Michael Derks, chief strategist at FxPro in London, said there was little in the way of fundamental news to account for the euro’s rebound after it briefly breached support at $1.30 early Monday.
“Apart from some good old short-covering, stop-hunting and sovereign wealth fund-buying, there is little in the way of fundamental developments to account for the mood change,” he said in emailed comments
Also Tuesday, sterling GBPUSD +0.2084% erased an early loss to change hands at $1.5936, up from $1.5907 on Monday.
The pound rallied after data showed U.K. annual inflation ticked up unexpectedly to 3.5% in March from 3.4% in February.
The data could make it more difficult for the Bank of England to back a further expansion of its quantitative-easing program next month, analysts said. Read Market Pulse.
Against its Canadian counterpart, the U.S. dollar fell after the Bank of Canada maintained its target for the overnight rate at 1%, as expected. The U.S. dollar USDCAD -1.1417% traded at 98.77 Canadian cents in recent action, a fall of 1.2%.
The Australian dollar AUDUSD +0.5040% traded at $1.039 from $1.0365.
The Reserve Bank of Australia’s interest-rate-setting committee minutes out Tuesday showed that board members judged it prudent to wait for more economic data before adjusting policy but didn’t explicitly rule out a rate cut in May.
Australia’s inflation data come out on a quarterly basis. The next release is due out next week, just before the central bank’s May rate-setting meeting.
The dollar USDJPY +0.3872% bought 80.69 Japanese yen, against ÂĄ80.47 in late trading on Monday.
Myra Saefong is a MarketWatch reporter based in San Francisco.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Sarah Turner in Sydney contributed to this report.
