Sept. 13, 2011, 9:31 a.m. EDT
Dollar slips against euro after Italian auction
By Deborah Levine and Sarah Turner, MarketWatch
NEW YORK (MarketWatch) — The dollar lost ground against the euro Tuesday, bouncing around in a narrow range through the European and Asian sessions, as Italy received tepid interest for its debt sale and U.S. stocks opened on a mixed note.
The dollar index, which measures the U.S. unit against a basket of six currencies, stood at 77.211, down from 77.543 in late North American trading on Monday.
The euro /quotes/zigman/4867933/sampled EURUSD +0.23% rose to $1.3663, from $1.3586 late in the previous session.
”The euro-dollar is trapped in yesterday’s range,” said Elsa Lignos, senior currency strategist at RBC Capital Markets.
The euro dipped after Italy had to pay a higher yield to sell five-year bonds as demand for its debt shrank from the last auction. Read more on Italian bond auction.
Earlier, reports that China may step in to buy Italian bonds helped calm market nerves frayed by Europe’s ongoing debt woes. See story on China buying European debt.
However, this proved short-lived and “lost traction given uncertainty about the size of China’s eventual involvement,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
Also causing foreign-exchange swings were shifts in European and U.S. stocks. The dollar has gone back to sometimes benefiting from shifts towards safer assets in times of market turmoil, including when stocks sell off. But German stocks recovered from earlier declines as well as the U.S. market. See more on European stocks.
“Any rally in risk looks little more than short-term correction or retracements at the moment, in the absence of any policy action or string of better data to drive it,” Lignos wrote in a note.
So far this month, the euro has lost about 5% against the dollar as worries about European debt keep popping up and the European Central Bank has hinted it may be done raising interest rates, pulling out a major support for the shared currency. Read about recent euro losses.
“Fears [about] the euro zone’s crisis and the risk of a credit shock combined with fears about the flagging global demand to ensure no let-up in the gloom that has gripped global markets for much of the past six weeks,” said strategists at Brown Brothers Harriman.
The Japanese yen is also viewed as relative safe haven, and at one point on Monday, the euro dropped to ¥103.88, its lowest level since mid-2001 against the Japanese currency.
However, after the reports about possible Chinese investment in Italy, the euro recovered. It lately traded at ¥104.89 /quotes/zigman/4868097/sampled EURJPY -0.23% , down from ¥105.06 in the previous session.
“China has around $3.3 trillion of forex reserves, and it is in their interest to see Europe do well, as it is their biggest trading partner, with around 30% of its exports going there,” said Chris Weston, strategist at IG Markets.
Full story: http://www.marketwatch.com/story/dollar-dips-amid-china-bond-buying-reports-2011-09-13
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