Apple iPhone 5 launch lifts global equities, hurting safe-haven flows
By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch)—The dollar fell versus major rivals, including the euro, on Friday after a published report said Spain and European officials are working together on a plan for economic reforms that could pave the way for a pre-emptive bailout of the euro-zone’s fourth-largest economy.
Meanwhile, the retail launch of Apple Inc.’s AAPL -0.48% iPhone 5 gave equities an added lift, putting pressure on traditional havens such as the dollar. See: Apple launches iPhone 5 to big hopes .
“The focus remained on Europe overnight and press reports that behind-the-scenes negotiations will lead to a face-saving compromise for Spain have been positive for the euro and positive for risk appetite more generally,” said Adam Cole, head of G-10 FX strategy at RBC Capital Markets in London.
The euro EURUSD +0.29% traded at $1.3024 in recent action, up from $1.2968 in North American trade late Thursday. The shared currency changed hands at 101.82 Japanese yen EURJPY +0.21% , a gain of 0.3%.
The ICE dollar index DXY -0.25% DXY -0.25% which measures the greenback against a basket of six other currencies, fell to 79.112, down from 79.428 in late North American trading Thursday. The WSJ dollar index XX:BUXX -0.29% , which tracks against a larger basket, fell to 69.20 from a Thursday close of 69.44.
The Financial Times, citing unnamed sources, reported that the European Union and the Spanish government were working behind the scenes on a package of Spanish economic reforms that could be unveiled as early as next week.
The measures reportedly focus on measures that would be demanded by international lenders as part of a rescue program and could pave the way for an official request for help that would include implementation of the European Central Bank’s plan for potentially unlimited bond purchases in the secondary market. See: Spain reform plan to be outlined next week: FT .
“A compromise along the lines suggested—Spain committing to reforms before requesting help—would allow the Spanish government to draw a line between a bailout package and domestic policy, rather than appearing to have policy dictated externally. To the extent that this makes Spain more likely to request help and so unlock the ECB’s balance sheet, it is good news,” Cole said, in a note to clients.
U.S. stock index futures pointed to a higher start for Wall Street, following through on gains in Asia and Europe inspired by speculation over Spain and the latest iPhone launch. See: Stock futures lifted by Spain, iPhone 5 .
Stocks, commodities and some currencies are viewed as riskier places to park cash than the U.S. dollar and Treasurys, and they tend to gain when investors are feeling more optimistic about future market direction.
The British pound GBPUSD +0.40% advanced, rising to $1.6276 from $1.6217.
The Australian dollar AUDUSD +0.62% rose to $1.0506 from $1.0437 in late trading Thursday.
The dollar also lost a bit of ground against the Japanese yen USDJPY -0.08% , edging down to ÂĄ78.18 from ÂĄ78.26 late the previous day.
Currency strategists at BNP Paribas said that they expect the dollar’s weakness to continue, given last week’s announcement by the Federal Reserve that it is going to buy assets for an unspecified period until it sees recovery in the U.S. labor market.
“The Fed’s action provides substantial liquidity (our economists expect QE3 to be larger than QE1 or QE2) which should drive the U.S. dollar lower over the months ahead,” the strategists said.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
