Forex - Dollar gains on escalating Spanish financial distress

Published 05/29/2012, 09:40 PM
Updated 05/29/2012, 09:41 PM
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Investing.com - The dollar rose against major world currencies Wednesday on growing concerns that Spain is running deeper into financial duress, which sparked a global rush to the safety of the liquid greenback.

In Asian trading on Wednesday, EUR/USD was trading down 0.28% at 1.2468.

The Spanish government is preparing to recapitalize the Bankia financial institution with EUR19 billion, while the regional government of Catalonia has asked Madrid for help refinancing its debts.

Reports that Spain will issue bonds to bail out its banks and regional governments — when yields in public debt auctions have already spiked to around 7 percent — fueled fears the debt crisis is heating up in Spain.

Spain is home to a much larger economy than that of Greece, which was bailed out by the European Commission, the European Central Bank and the International Monetary Fund earlier this year via EUR130 billion in rescue funding.

The U.S. currency did battle some homegrown headwinds, however, as sluggish U.S. housing data dampened the greenback's gains, even if just a little.

The S&P/Case-Shiller Home Price Index for March fell by 2% in the first quarter of 2012 from the fourth quarter of last year and was down 1.9% versus the first quarter of 2011.

The March 10-City composite was down 2.8% from March of last year, while the 20-City composite was down 2.6% on year.

Home prices are down 35 percent from their peak in 2006.

Meanwhile the Conference Board's U.S. consumer confidence dropped unexpectedly in May, dipping to 64.9 from a downwardly revised 68.7 in April and below calls for a reading of 70.0.

The greenback was up against the pound, with GBP/USD down 0.18% and trading at 1.5613.

The U.S. currency was up against the yen, with USD/JPY trading up 0.03% at 79.52, and up against the Swiss franc, with USD/CHF trading up 0.32% at 0.9636.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.24% at 1.0248, AUD/USD down 0.68% at 0.9782 and NZD/USD down 0.43% at 0.7595.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.29% at 82.70.

Laer Wednesday in the U.S., pending homes sales figures are due out as are numbers on mortgage applications.

In Europe, ECB President Mario Draghi is due to appear in public.







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