Forex - Euro rises against dollar as market sentiment improves

Published 12/20/2011, 06:32 AM
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Investing.com - The euro climbed against the U.S. dollar on Tuesday and was mixed to broadly lower against its other major counterparts as unexpectedly strong German data and a well received Spanish bond auction boosted demand for riskier assets.

During European late morning trade, the euro was up against the U.S. dollar, with EUR/USD advancing 0.63% to hit 1.3080.

Market sentiment was boosted after German research institute Ifo said its Business Climate Index rose to a seasonally adjusted 107.2 in December from 106.6 in November, confounding expectations for a decline to 106.0.

Elsewhere, Spain saw borrowing costs fall sharply at an auction of three and six-month government bonds.

Spain’s Treasury sold more than the targeted amount of EUR4.5 billion, auctioning EUR 7 billion of three-month bonds at an average yield of 1.73%, down from 5.11% at a similar auction last month.

Meanwhile, EUR1.92 billion of six-month bonds were sold, at an average yield of 2.43%, down from 5.22% in November.

But investors remained wary after European Central Bank President Mario Draghi reiterated Monday that the bank’s bond purchasing program was temporary and warned the region’s economy was likely to enter a recession by early next year.

The euro was lower against the pound, with EUR/GBP sliding 0.21% to hit 0.8368.

In the U.K., a report by the Confederation of British Industry said retail sales unexpectedly rose at the fastest rate in seven months in December, but warned that sales were expected to fall sharply again after Christmas.

The single currency strengthened against the yen but remained almost unchanged against the Swiss franc, with EUR/JPY rising 0.54% to hit 101.99 and EUR/CHF dipping 0.04% to hit 1.2178.

In Switzerland, official data showed that the trade surplus widened more-than-expected in November, as exports rose 3.8% year-on-year to CHF17.75 billion. The overall trade surplus was CHF3.00 billion.

Elsewhere, the euro was broadly lower against the Canadian, Australian and New Zealand dollars, with EUR/CAD inching down 0.01% to hit 1.3500, EUR/AUD shedding 0.39% to hit 1.3083 and EUR/NZD losing 0.35% to hit 1.7141.

The Australian dollar was boosted earlier after the minutes of the Reserve Bank of Australia’s December 6 meeting showed that policymakers saw continued expansion in the domestic economy.

Later Tuesday, the U.S. was to publish official data on building permits as well as a report on housing starts.


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