Weak China data sparks expectations for more stimulus
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar traded higher versus most major rivals in slow trade Thursday, while the euro struggled to regain upside momentum tied to hopes the European Central Bank will eventually intervene to help lower borrowing costs for Spain and Italy.
The dollar index DXY +0.28% , which measures the U.S. unit against a basket of six major rivals, rose to 82.600 versus 82.366 in North American trade late Wednesday.
The euro EURUSD -0.50% bought $1.2313, down from $1.2359.
“Two days ago [the euro] comfortably above the $1.2400 level, [and] this morning it is back at the bottom of its recent range. The euro has been enthralled in recent sessions by speculation as to whether and when the ECB will to take action to calm the pressure in the Spanish bond market,” said Jane Foley, senior currency strategist at Rabobank Internatinal in London.
It’s likely, she said, that the situation in Spain “will get worse before it gets better for the simple reason that the Spanish government is likely to delay any request for aid from the [euro-zone rescue funds] if market pressure appears to lift. The euro still faces an unsettled period and risk for further dips to the downside still remains.”
ECB President Mario Draghi last week said the ECB was preparing plans that would potentially allow it to intervene in bond markets in concert with the region’s rescue funds. Such an effort, however, would require struggling governments to apply to the rescue funds for help and to agree to strict policy conditions.
The Norwegian krone, meanwhile, has outperformed all other G-10 currencies over the past five days, Foley said in a note, with its performance enhanced by strong domestic data and higher oil prices.
The euro EURNOK +0.34% fetched 7.2733 kroner, little changed from Wednesday but near its lowest level versus the Norwegian unit since early 2003.
The dollar traded at 78.33 Japanese yen USDJPY -0.12% down from ÂĄ78.46 on Wednesday.
The Bank of Japan on Thursday left monetary policy steady, as expected, and let the size of its asset-purchase program unchanged. The central bank said it would proceed with monetary easing “in a continuous manner by steadily increasing the amount outstanding” of the asset-buying program that is currently in force. See: Bank of Japan stands pat but is open to more easing .
The British pound GBPUSD -0.18% changed hands at $1.5648, down slightly from $1.5652.
The Australian dollar AUDUSD -0.08% changed hands at $1.0575 versus its U.S. counterpart, up slightly from $1.0566 late Wednesday. The currency traded as high as $1.0613 earlier in the day, boosted by stronger-than-expected July employment data.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
