Forex - Dollar broadly lower after euro zone, China data

Published 01/17/2012, 07:58 AM
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Investing.com - The U.S. dollar was broadly lower against its major counterparts on Tuesday, as better-than-forecast data on German business sentiment and Chinese economic growth saw investors shun the safe haven greenback in favor of riskier assets.

During European afternoon trade, the dollar was sharply lower against the euro, with EUR/USD jumping 1.05% to hit 1.2799.

The euro strengthened after the ZEW Centre said that its index of German business sentiment recorded its largest ever monthly increase in January, indicating that the euro zone’s largest economy is performing strongly despite the effects of the region’s debt crisis.

Elsewhere, Spain auctioned EUR4.9 billion of short-term government debt at sharply lower yields earlier, indicating that investor sentiment has not been hit by last week’s sovereign ratings downgrade.

Risk appetite had been bolstered earlier after better-than-forecast data on Chinese fourth quarter growth eased concerns over the outlook for global economic growth.

But the single currency remained vulnerable after Standard & Poor’s downgraded the triple-A rating of the euro zone’s bailout fund by one notch on Monday, following Friday’s downgrade of nine euro zone sovereigns, including France.

Meanwhile, talks aimed at negotiating a restructuring of Greece’s debts remained deadlocked, amid disagreements over a bond swap with private creditors.

The greenback was also lower against the pound, with GBP/USD advancing 0.41% to hit 1.5388.

In the U.K., official data showed that the annualized rate of consumer price inflation declined to 4.2% in December, from 4.8% the previous month.

The steep decline supported the Bank of England’s view that inflation will fall off sharply in 2012, allowing the bank to ease monetary policy further.

Elsewhere, the greenback was almost unchanged against the yen but fell sharply against the Swiss franc, with USD/JPY dipping 0.01% to hit 76.77 and USD/CHF tumbling 0.91% to hit 0.9453.

Earlier Tuesday, Bank of Japan Governor Masaaki Shirakawa and Prime Minister Yoshihiko Noda held talks to discuss Europe’s debt crisis, after the euro touched a more than decade low against the yen on Monday, adding to concerns over the impact of the strong yen on Japan’s largely export based economy.

The greenback was also down against its Canadian, Australian and New Zealand counterparts, with USD/CAD falling 0.47% to hit 1.0129, AUD/USD jumping 1.03% to hit 1.0419 and NZD/USD climbing 0.92% to hit 0.8008.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, dropped 0.66% to hit 81.06.

Later in the day, the U.S. was to produce a report on manufacturing activity in New York State.


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