Dollar prevails as euro, sterling come under pressure
Credit: Reuters/Bernadett Szabo
U.S. dollar, euro and Swiss franc bank notes are seen on top of the notes of the Hungarian forint in a bank in Budapest August 8, 2011.
The common currency fell to $1.2640 EUR= from a near one-week high of $1.2770 after a closely watched ZEW survey showed German analyst and investor morale fell below zero for the first time in nearly two years in October.
Adding to the gloom, the German government cut its growth forecasts, euro zone industrial production fell, and Fitch warned it may cut France's credit ratings, saying the outlook for the country's economy had deteriorated.
Those factors added to worries about global growth at a time when the U.S. Federal Reserve is unwinding its massive stimulus program.
The euro also lost ground against the yen and the Swiss franc. It traded at 135.60 yen EURJPY=R, having earlier plumbed an 11-month low of 135.04. On the Swiss franc, it dipped to a two-week low of 1.2062 francs EURCHF=R.
'ECB President Mario Draghi will have more opportunities to convince markets of the ECB's resolve when he delivers remarks at two different conferences Wednesday,' analysts at BNP Paribas wrote in a note to clients.
'Euro zone 5y5y inflation expectations fell to a new low of 1.8 percent, suggesting the ECB has an uphill battle ahead. We continue to expect further easing measures in Q1, and would look for ECB officials to continue to stress willingness to do more if necessary.'
Sterling also came in the cross hairs of sellers after British inflation slowed in September to its lowest level in five years, prompting markets to push out the likely timing of an interest rate hike by the Bank of England.
Sterling fell as far as $1.5895 GBP=D4, reaching lows not seen since November 2013 and bringing in focus the November trough of $1.5852.
The lack of inflationary pressure across many developed economies, helped in part by a 26 percent slide in oil prices since June, has knocked government bond yields lower.
So even with the Fed on track to wind up its bond-buying program soon, the 10-year Treasury yield US10YT=RR has dropped back below 2.2 percent, reaching 16-month lows.
Normally, that would dampen the allure of the greenback against the yen, but not this time with the euro and sterling under even more pressure.
As a result, the dollar managed to rebound to 107.05 yen JPY= from a one-month low of 106.68.
It also climbed against the dollar-bloc currencies, pushing to its highest level in more than five years on its Canadian peer. It traded as high as C$1.1313 CAD=D4, before edging back to C$1.1287.
The Australian dollar slipped toward 87 U.S. cents AUD=D4 and could retest a four-year trough of $0.8642 set early this month if a raft of Chinese data were to disappoint.
China, Australia's biggest trading partner, will release inflation data around 9:30 p.m. EDT, followed next week by industrial output and third-quarter gross domestic product. ECONCN
(Editing by Leslie Adler)
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