Dollar Weakens; Spain Bailout Hopes Lift Euro
The U.S. dollar weakened slightly versus most major rivals Tuesday, undercut as talk of a Spanish bailout provided a further, modest boost to investor appetite for risky assets.
The ICE dollar index DXY -0.27% , which measures the U.S. dollar against a basket of six rivals, traded at 79.715, down from 79.796 in late North American trading on Monday.
Another measure of the U.S. currency, the WSJ Dollar Index XX:BUXX -0.16% , traded at 69.73, little changed from 69.72 in late trading Monday.
The euro EURUSD +0.42% traded at $1.2924, up from $1.2894 in late trading the previous day, while the British pound GBPUSD +0.24% reached $1.6143 versus $1.6134.
Reuters, citing unnamed European officials, reported that Spain was prepared to ask for a full sovereign bailout as early as this weekend — a move that would clear the way for the European Central Bank to launch its program of bond purchases.
The report said Germany, however, was pressing Madrid to hold off on a request amid concerns it would create political strains with Germany’s parliament. Instead, German officials would prefer to bundle a Spain request with measures for Cyprus and Greece rather than send aid requests to the Bundestag one by one, Reuters reported. A subsequent news report said Rajoy had dismissed talk of a weekend bailout request.
Strategists said the reports offered only limited fodder for trade, particularly amid a lack of economic data.
“For now we would not wish to chase the euro to the topside, rallies up to $1.2960 to $1.2971 are worth fading,” said Jeremy Stretch, currency strategist at CIBC in London. “Alternatively, euro bears need to see a durable break through $1.2877 to encourage a slide back towards the 200 day [moving average].“
The Australian dollar sank against the U.S. dollar on Tuesday, pressured after the Australian central bank announced a surprise interest-rate cut.
The Australian currency AUDUSD -0.74% fell to $1.0311 after the Reserve Bank of Australia (RBA) surprised economists by cutting the country’s cash rate to 3.25%, from 3.5%, effective Wednesday.
The Australian dollar traded at $1.0369 before the decision and $1.0371 in late North American trading on Monday. RBA Governor Glenn Stevens said in a statement that the risks to the global economy remained to the downside and that the outlook for growth in Australia looked a “little weaker” than previously.
Against the Japanese yen USDJPY +0.00% , the dollar traded at 78.15 yen, up from ¥78.01 on Monday.
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