MW: U.S. dollar up; euro set for third weekly decline
Euro at more than 2-year low vs. greenback, near 12-year low vs. yen
By Myra P. Saefong and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — The U.S. dollar advanced Friday, with the euro set to register a third-weekly decline, trading at a more than two-year low against the greenback as investors’ appetite for risk ebbed and Spanish bond yields saw renewed upward pressure.
The ICE dollar index DXY +0.58% , a measure of the greenback against a basket of six major global currencies, stood lately at 83.397, compared with 82.926 on Thursday in North American trading. It’s around 0.1% higher for the week.
The euro EURUSD -0.8625% fell to $1.2174 from $1.2272. It’s down 0.6% for the week, on the heels of two straight losing weeks. The shared currency was trading at its lowest level against the dollar since June 2010, on a closing basis.
Against the Japanese yen, the euro EURJPY -1.0080% neared a 12-year low. The euro bought 95.56 yen, down 1.1% from Thursday. It hasn’t closed below ¥96 since November 2000, according to FactSet data.
The market’s in a “broad ‘risk-off’ mode,” keying off news that the Spanish region of Valencia needs “help from the central government, Spanish 10-year yields climbing above 7% and the [European Central Bank] stating that marketable debt instruments backed by Greece are ineligible as collateral,” said Wojtek Zarzycki, chief investment officer of Optimal Investing.
Against that backdrop, the euro is down sharply and the U.S. dollar and Japanese yen are strengthening in a “flight to safety,” he said.
The government of the Spanish region of Valencia said Friday it will apply for financial aid from a newly created government fund as it struggles to refinance maturing debt. Read more on Valencia.
The euro also found little solace after euro-zone finance ministers, in a widely expected move, formally backed an agreement to lend up to 100 billion euros to Spain to capitalize the nation’s lenders.
Meanwhile, the yield on the 10-year Spanish government bond ES:10YR_ESP +3.82% rose 0.09 percentage point to 7.07%, again topping the sensitive 7% level that’s seen as marking potentially unsustainable borrowing costs for the Spanish government.
“Fears that a contracting economy will widen Spain’s government budget deficit despite prospective austerity measures drove Spanish government bond yields sharply higher,” said John Lonski, chief economist at Moody’s Capital Markets Group.
The WSJ dollar index XX:BUXX +0.55% , a new benchmark tracking the greenback’s moves against a basket of some of the world’s most heavily traded currencies, rose to 72.28, compared with 71.89.
“Mostly because the euro-zone’s outlook is deteriorating more rapidly than that of the U.S., the euro could break under $1.20 by the end of July,” said Lonski
The euro has been in a trading range of $1.215 and $1.233 since July 5, said Zarzycki, adding: “There are sizable option barriers at $1.215 before a fresh move downwards in the EUR/USD pair can continue.”
Among other major currencies, against the Japanese yen USDJPY -0.1581% , the greenback was changing hands at ¥78.48, little changed from ¥78.57. It’s down about 1% from last Friday.
The British pound GBPUSD -0.6148% eased to $1.5632 from $1.5720, trading around 0.4% higher for the week.
Polish zloty, Canada dollar weaken
The Polish zloty USDPLN +1.1437% was a Friday standout, with the dollar buying 3.415 zloty, up 1.1% from Thursday, down 0.1% for the week.
“The zloty has been holding up well recently, despite the bad news in the euro zone,” said Zarzycki.
But Friday’s news, “coupled with not being able to break below the 3.37 level again, led some PLN [zloty] longs to close their positions,” he said. And “along with some softer CPI data out of Poland, stops were run and the PLN has lost considerable ground.”
The Canadian dollar USDCAD +0.3925% , meanwhile, edged lower against its U.S. counterpart, with the latter trading at 1.0104 Canadian dollars, up from C$1.0076 but still down about 0.4% for the week.
As the nation’s retail-level inflation rate came in lower across the board, the Canadian dollar “lost its luster,” said Zarzycki. The consumer price index for June, on a seasonally-adjusted monthly basis, fell 0.2%, following a 0.3% fall the previous month, according to data reported Friday by Statistics Canada.
The Australian dollar AUDUSD -0.4517% fell to $1.0387 from $1.0427, up around 1.5% from a week ago.
Myra Saefong is a MarketWatch reporter based in San Francisco.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. V. Phani Kumar in Hong Kong contributed to this report.
