|Dollar rallies on global growth concerns; euro slips|
|Thursday, 20 September 2012 14:11|
The U.S. dollar rose against major currencies on Thursday after weak data from the United States, Europe and China stoked global growth worries, driving investors to perceived safe-haven assets.
The euro slid to a one-week low against the dollar even as Spain successfully sold 4.8 billion euros ($6.27 billion) of debt. [ID:nL5E8KK4D3] Meanwhile, higher-yielding, commodity-linked currencies, such as the Australian and Canadian dollars, fell.
U.S. manufacturing suffered its weakest quarter in three years and conditions at European businesses worsened, surveys showed on Thursday, while China's economy continued to lose momentum.
The disappointing data came after central banks in the world's major economic powers, including the United States, Europe and Japan, took steps in recent weeks to bolster their respective economies.
"We're seeing a return of risk aversion because the initial euphoria following the ECB and Fed announcements is beginning to wane," said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston.
The Australian dollar fell 0.6 percent to $1.0410 and sterling slipped 0.2 percent to $1.6192. The U.S. dollar rose 0.7 percent to 0.9340 Swiss franc and up 0.3 percent against the Canadian dollar to C$0.9775.
Global economic weakness and signs of a faltering U.S. economy can be contributing factors for investors to pour money into safe-haven U.S. Treasury bonds, thereby helping the greenback appreciate.
Other data on Thursday also showed U.S. jobless claims held near two-month highs last week, while factory activity in the U.S. mid-Atlantic region shrank for the fifth month in a row in September.
Manufacturing in China contracted for an 11th straight month in September, according to a private sector survey of factory managers. In the euro zone, a downturn in activity in the service sector steepened this month at the fastest pace since July 2009.
The euro fell 0.8 percent to $1.2948, off Monday's four-month peak of $1.3169. It hit a session trough of $1.2919 on Reuters data, having dropped through stop-loss orders at $1.2950.
Against the yen, the euro shed 0.8 percent to trade at 101.39 yen.
Spanish 10-year borrowing costs fell to their lowest level since January at an auction on Thursday, but the news offered little support to the euro as uncertainty about whether Madrid would seek a bailout unnerved investors.
"Rather than being viewed as a positive, it's almost being viewed as a negative in the sense that it is going to potentially delay the timeframe in which Spain may actually request an official bailout," said Gareth Sylvester, senior currency strategist at Klarity FX in San Francisco.
Spain has been dithering on formally requesting financial aid that could allow the European Central Bank to buy its bonds.
Some analysts said the euro's losses could be limited by the European Central Bank's plan to intervene in bond markets to lower borrowing costs and after the Federal Reserve unleashed a fresh bout of monetary easing last week.
"I think euro/dollar will form a base to the extent this weakness is about global risk appetite which is backstopped by the Fed, and we think Spain will eventually ask for a bailout," said Adam Cole, head of FX strategy at RBC Capital Markets in London "I would be surprised if we get back down below $1.28."
The dollar fell 0.1 percent to 78.30 yen, pulling away from a one-month high of 79.21 yen set on Wednesday after the BOJ boosted its asset-buying program to help fuel the country's economic recovery.
Andrew Robinson, FX analyst for Saxo Capital Markets in Singapore, said the dollar was likely to trade in a range of roughly 77 to 79 yen over the next few weeks.
Any drop toward 77 yen could spark fresh jitters about the potential for yen-selling intervention by Japanese authorities. The dollar hit a seven-month low of 77.11 yen last week.