Investing.com - The U.S. dollar was higher against most of its major counterparts Tuesday, while the euro sank to a fresh 2-year low as euro zone debt worries and global growth fears continued to boost demand for the greenback’s safe haven.
During U.S. afternoon trade, the dollar was higher against the euro, with EUR/USD giving back 0.48% to hit 1.2253.
The euro came under pressure as Germany's top court was due to decide whether the EU's permanent bailout fund is compatible with national law, potentially leading to deeper fiscal integration within the region.
German finance minister Wolfgang Schauble said that any delay to the region’s permanent rescue fund could rattle financial markets and cause “considerable uncertainty” among investors.
Traders also eyed talks between EU finance ministers, after their euro zone counterparts held a previous meeting on Monday.
Euro zone ministers agreed on Monday to make EUR30 billion in aid available to assist Spain’s struggling banking sector by the end of the month, while also supporting plans to extend Spain’s deficit target deadline by one year to 2014.
They made no apparent progress, however, on activating the bloc's rescue funds to intervene in bond markets and bring down Spain and Italy’s spiraling borrowing costs.
Spain’s 10-year government bonds eased sharply to 6.78% earlier, moving below the critical 7% threshold which is widely seen as unsustainable in the long term.
The greenback was also higher against the pound, with GBP/USD falling 0.13% to hit 1.5507.
Sterling came under pressure after Bank of England Governor Mervyn King said that the expected U.K. recovery has not appeared and that he is worried over the outlook for U.K. exports due to the pound’s strength.
Sterling remained supported after official data showed that U.K. manufacturing production rose 1.2% in May, beating expectations for a 0.1% rise and following a 0.8% fall the previous month.
A separate report showed that the U.K.’s trade deficit narrowed more-than-expected in May, narrowing to GBP8.4 billion from a deficit of GBP9.7 billion the previous month.
Elsewhere, the greenback was lower against the yen and higher against the Swiss franc, with USD/JPY shedding 0.11% to hit 79.47 and USD/CHF adding 0.44% to hit 0.9797.
Bank of Japan Governor Masaaki Shirakawa said earlier that the central bank planned to carry out powerful easing measures to help fight deflation.
The comments come ahead of a BOJ two-day policy-board meeting starting Wednesday.
Meanwhile, the greenback was moderately higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD easing up 0.14% to hit 1.0207, AUD/USD falling 0.02% to hit 1.0208 and NZD/USD dipping 0.06% to hit 0.7958.
Fears over the global economic outlook intensified after official data showed that Chinese exports and imports in June slowed from the previous month, as weakening global demand weighed.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.33%, to trade at 83.55.