Forex - Greenback soars on Greek fears, risk flight

Investing.com - The U.S. dollar traded higher against almost all of its major counterparts Monday, as concerns over the implications of a Greek exit from the euro zone sapped investor risk taking desire.

During U.S. trade, the dollar was trading close to a four-month high against the euro, with EUR/USD shedding 0.58% to hit 1.2842.

Bearish speculation over the possibility of a Greek exit from the euro zone intensified Monday, as talks aimed at forming a coalition government remained stalemated.

The stalemate fueled fears that a fresh round of elections is becoming inevitable and cast doubts over the country’s ability to uphold its fiscal commitments.

Meanwhile, concerns over the health of Spain’s banking system persisted, pushing the yield on Spanish 10-year bonds to 6.27%, the highest level since December, after an auction of government bonds earlier saw the country’s short-term borrowing costs rise.

Adding to the bearish sentiment, official data showed that industrial production in the euro zone unexpectedly declined 0.3% in March, against expectations for a 0.4% increase, fuelling fears over the health of the region’s economy.

However,  the greenback traded lower against the pound, with GBP/USD rising 0.27% to hit 1.6112.

The pound remained supported by the view that sterling is a good safe haven alternative to the euro.

Elsewhere, the greenback was lower against the yen but pushed higher against the Swiss franc, with USD/JPY slipping 0.21% to hit 79.76 and USD/CHF climbing 0.56% to hit 0.9350.

In Switzerland, official data showed that producer prices slipped 0.1% in April, declining for the first time in five months and defying expectations for a 0.3% increase.

The greenback was stronger against its Canadian counterpart and rose to multi-month highs against its Australian and New Zealand cousins, withUSD/CAD adding 0.20% to hit 1.0025, AUD/USD losing 0.42% to hit 0.9976 and NZD/USD falling 0.61% to hit 0.7780.

Sentiment on the growth linked dollars was hit after China’s central bank said it was to cut the reserve requirement ratios for banks, in an attempt to shore-up economic growth.

In addition Monday, official data showed that retail sales in New Zealand fell sharply in the first quarter, declining 1.5%, after increasing by 2.2% in the preceding quarter. Analysts had expected retail sales to decline by 0.5% in the three months to March.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.40% to trade close to a two-month high at 80.75.

Elsewhere Monday, European Union finance ministers were set to hold talks in Brussels, while Greece’s president was due to hold last-ditch cross party talks in an attempt to avert a second round of elections.