NEW YORK (Dow Jones)--The dollar was higher against the euro Tuesday as investors focused on a possible slowing of China's economy, which could throw a wrench in the global recovery.
But the dollar had given up some of its gains against the common currency by early afternoon, as better-than-expected U.S. consumer confidence data acted as a counter to other concerns floating around the market, helping spark a partial recovery in currencies sensitive to global growth.
"Risk aversion ran amok, and is unwarranted," to the degree it had invaded markets, said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn. "As nerves begin to steady, the demand for the dollar is seeming to abate."
Tuesday in New York, the euro was at $1.4087 from $1.4162 late Monday, according to EBS via CQG. The dollar was at Y89.62 from Y90.24, while the euro was at Y126.25 from Y127.79. The U.K. pound was at $1.6157 from $1.6232. The dollar was at CHF1.0445 from CHF1.0396.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 78.410 from 78.164.
Even though the euro and the commodity-backed currencies of Australia, Canada and New Zealand were able to claw back some of their earlier losses, worry over China and continued concern over mounting fiscal problems in the euro zone kept the dollar and yen well-bid.
"The data is better, but it doesn't seem to be enough to turn the tide," leaving a cloud of risk aversion over markets, said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J.
U.S. consumer confidence rose for the third consecutive month in January, according to a report released Tuesday by The Conference Board.
The index of consumer confidence increased to 55.9 in January from a revised 53.6 in December, which was originally reported as 52.9. The January reading was better than economists' projection of 54.0, according to a survey conducted by Dow Jones Newswires.
The euro remained under pressure over the distressed finances of Greece and other peripheral euro zone nations. Greek Finance Minister George Papaconstantinou on Tuesday detailed a diversified global borrowing plan to plug government fiscal gaps including hopes to raise up to $10 billion from Chinese and other Asian investors.
Speaking in an interview with Dow Jones Newswires, he also said he is confident that the European Union council of finance ministers will approve the country's three-year deficit-reduction plan next month.
Greece is under pressure from the European Union and ratings agencies to fix a 2009 budget deficit of 12.7% of gross domestic product--four times the euro zone's 3% ceiling.
The confluence of global concerns is "causing people to go into wait-and-see mode," said Brian Kim, currency strategist at UBS in Stamford, Conn., keeping currencies in tight ranges "while the dust settles."
There are multiple reports that Chinese banks have been asked to curb lending, though the central bank, the People's Bank of China, hasn't said so officially. If China puts the brakes on growth, some investors worry the global economic recovery could be at risk.
The commodity-backed currencies had dropped significantly in the face of a possibly slowing Chinese economy, but they had recovered part of their losses by the afternoon. The possibility the voracious Chinese appetite for commodities could slow had sent the Australian dollar down more than 1% earlier in the session, but by early afternoon, it was down only 0.39% against the U.S. dollar.
The Federal Open Market Committee of the U.S. Federal Reserve on Tuesday began its two-day meeting. The committee will announce Wednesday any changes to key U.S. interest rates. No changes are expected, but investors will be paying close attention to whether the committee alters the language in its statement, indicating any timeline for future interest rate increases or policy tightening.
"You might get a hint from the FOMC statement that will confirm things are actually on track" when it comes to the U.S. rebound, Wilkinson said, which could help spark a solid rebound in risk appetite.
Source:online.wsj.com/
No comments:
Post a Comment