Dollar gains after global data, Spanish auction
SAN FRANCISCO (MarketWatch) -- The dollar gained against major currencies on Thursday as weak economic data from China and the euro zone underlined worries about global growth, and a successful Spanish debt auction reduced the likelihood that the country will ask for a bailout soon.
The ICE dollar index (DXY) , which measures the greenback against a basket of six major currencies, rose to 79.428, from 79.113 in late North American trading on Wednesday.
The euro (EURUSD) fell to $1.2968 from $1.3051 Wednesday.
Driving some of the moves, manufacturing data for Europe signaled a deepening of the downturn across the region.
A preliminary euro-zone purchasing-managers' index, or PMI, for the euro zone fell to its lowest level since June 2009. Read: Euro-zone PMI hits 39-month low.
The weak data is likely to spur the European Central Bank to cut its benchmark lending rate again by a quarter percentage point, analysts at Brown Brothers Harriman said. Lower rates tend to be negative for a currency.
The dollar had support even earlier after a preliminary version of HSBC's Chinese manufacturing PMI survey came in a little better for the month from August, but still well below the mark that separates economic expansion from contraction. Read more on China PMI.
"Unfortunately, the outlook isn't likely to brighten for the euro zone in the months to come, as many countries still need to get their fiscal house in order," said Kathy Lien, managing director at BK Asset Management, in a note. "Slow growth in China makes the global outlook even worse."
Besides the data, analysts put a lot of weight on the outcome of Spain's auction of long-term bonds. Demand was better than at the last auction, possibly because investors feel backstopped by the ECB's promise to buy distressed debt if a country asks for a bailout. Read: Spain's bond auction draws good demand.
But there's the catch: a country has to ask for a bailout first, and Spain's leadership insists they aren't planning to do that. And while yields are falling to more manageable levels, they have no need to.
A successful auction, and similar results at sales coming up, "could reduce the chances of a bailout request ahead of the all important European Union summit on Oct. 18," Citi currency strategist Valentin Marinov said.
The dollar pared gains after a report on Philadelphia manufacturing came in better than expected. That followed data showing first-time jobless claims were higher than expected in the latest week. Read: Philly Fed beats forecasts.See: U.S. jobless claims show little improvement.
"The details trade off against one another here with the balance indicating greater cause for pessimism toward near term GDP growth, but cautious room for mild optimism further out," analysts at Scotia Capital wrote in a note.
The dollar ended little changed versus the British pound (GBPUSD) , at $1.6217 from $1.6218 Wednesday.
The Australian dollar (AUDUSD) fell to $1.0437 from $1.0483 Wednesday, pressured by the Chinese PMI data.
Against the Japanese yen, the dollar (USDJPY) traded at ¥78.26, little changed from ¥78.36 Wednesday. The dollar gained against the yen on Wednesday after the Bank of Japan expanded its asset-purchase program while keeping interest rates at ultra-low levels.
However, yen strength soon reasserted itself, with analysts saying that the Bank of Japan's moves weren't aggressive enough to counter the U.S. Federal Reserve easing that has pushed the dollar lower over the past week.