U.S. dollar up; euro set for third weekly decline
SAN FRANCISCO (MarketWatch) -- The U.S. dollar advanced Friday, with the euro set to register a third weekly decline, trading at a more than two-year low against the greenback as investors' appetite for risk ebbed and Spanish bond yields saw renewed upward pressure.
The ICE dollar index (DXY) , a measure of the greenback against a basket of six major global currencies, stood lately at 83.457, compared with 82.926 on Thursday in North American trading. It's around 0.13% higher for the week.
The euro (EURUSD) fell to $1.2161 from $1.2272. Down almost 0.7% for the week, this decline is the third in as many weeks. The shared currency was trading at its lowest level against the dollar since June 2010, on a closing basis.
"We expect the euro [to] trade below 1.1875 in the coming weeks," said Chistopher Vecchio, currency analyst for FXCM. "A risk-averse environment predicated around Euro-zone concerns could push the euro as low as 1.1695 by the end of August."
Against the Japanese yen, the euro (EURJPY) neared a 12-year low. The euro bought 95.47 yen, down 1.2% from Thursday. It hasn't closed below ¥96 since November 2000, according to FactSet data.
"The market's in a "broad 'risk-off' mode," keying off news that the Spanish region of Valencia needs "help from the central government, Spanish 10-year yields climbing above 7% and the [European Central Bank] stating that marketable debt instruments backed by Greece are ineligible as collateral," said Wojtek Zarzycki, chief investment officer of Optimal Investing.
The government of the Spanish region of Valencia said Friday it will apply for financial aid from a newly created government fund as it struggles to refinance maturing debt. Read more on Valencia.
The euro also found little solace after euro-zone finance ministers, in a widely expected move, formally backed an agreement to lend up to 100 billion euros to Spain to capitalize the nation's lenders.
Meanwhile, the yield on the 10-year Spanish government bond (10YR_ESP) rose 0.09 percentage point to 7.07%, again topping the sensitive 7% level that's seen as marking potentially unsustainable borrowing costs for the Spanish government.
"Fears that a contracting economy will widen Spain's government budget deficit despite prospective austerity measures drove Spanish government bond yields sharply higher," said John Lonski, chief economist at Moody's Capital Markets Group.
The WSJ dollar index (BUXX) , a new benchmark tracking the greenback's moves against a basket of some of the world's most heavily traded currencies, rose to 72.33, compared with 71.89.
"Mostly because the euro-zone's outlook is deteriorating more rapidly than that of the U.S., the euro could break under $1.20 by the end of July," said Lonski
The euro has been in a trading range of $1.215 and $1.233 since July 5.
"The euro is down against the U.S. dollar, Japanese yen, British pound and even the higher yielders like the Canadian dollar and aussie," Zarzycki added. "We see the dollar and yen firming as the new week begins with the euro continuing its depreciation."
Among other major currencies, against the Japanese yen (USDJPY) , the greenback was changing hands at ¥78.47, little changed from ¥78.57. It's down 1% from last Friday.
The British pound (GBPUSD) eased to $1.5619 from $1.5720, trading over 0.3% higher for the week.
Polish zloty, Canada dollar weaken
The Polish zloty (USDPLN) was a Friday standout, with the dollar buying 3.418 zloty, up 1.2% from Thursday and flat for the week.
"The zloty has been holding up well recently, despite the bad news in the euro zone," said Zarzycki.
But Friday's news, "coupled with not being able to break below the 3.37 level again, led some PLN [zloty] longs to close their positions," he said. And "along with some softer CPI data out of Poland, stops were run and the PLN has lost considerable ground."
The Canadian dollar (USDCAD) , meanwhile, edged lower against its U.S. counterpart, with the latter trading at 1.0122 Canadian dollars, up from C$1.0076 but still down near 0.2% for the week.
As the nation's retail-level inflation rate came in lower across the board, the Canadian dollar "lost its luster," said Zarzycki. The consumer price index for June, on a seasonally-adjusted monthly basis, fell 0.2%, following a 0.3% fall the previous month, according to data reported Friday by Statistics Canada.
The Australian dollar (AUDUSD) fell further to $1.0382 from $1.0427, up 1.5% from a week ago.