September 20, 2012 / 5:45 PM / 5 years ago

FOREX-Dollar rallies on global growth concerns; euro slips

5 Min Read

* Dollar gains against most major currencies
    * Euro falls as risk aversion rises though Spain borrowing
costs ease
    * U.S. factory, jobless data shows recovery fails to take

    NEW YORK, Sept 20 (Reuters) - The U.S. dollar rose against
major currencies on Thursday after weak data from the United
States, Europe and China stoked global growth worries, driving
investors to perceived safe-haven assets.
    The euro slid to a one-week low against the dollar even as
Spain successfully sold 4.8 billion euros ($6.27 billion) of
debt. Meanwhile, higher-yielding,
commodity-linked currencies, such as the Australian and Canadian
dollars, fell.
    U.S. manufacturing suffered its weakest quarter in three
years and conditions at European businesses worsened, surveys
showed on Thursday, while China's economy continued to lose
    The disappointing data came after central banks in the
world's major economic powers, including the United States,
Europe and Japan, took steps in recent weeks to bolster their
respective economies.
    "We're seeing a return of risk aversion because the initial
euphoria following the ECB and Fed announcements is beginning to
wane," said Samarjit Shankar, managing director of global FX
strategy at BNY Mellon in Boston.
    The Australian dollar fell 0.6 percent to $1.0410 and
sterling slipped 0.2 percent to $1.6192. The U.S. dollar
rose 0.7 percent to 0.9340 Swiss franc and up 0.3 percent
against the Canadian dollar to C$0.9775.    
    Global economic weakness and signs of a faltering U.S.
economy can be contributing factors for investors to pour money
into safe-haven U.S. Treasury bonds, thereby helping the
greenback appreciate.
    Other data on Thursday also showed U.S. jobless claims held
near two-month highs last week, while factory activity in the
U.S. mid-Atlantic region shrank for the fifth month in a row in
    Manufacturing in China contracted for an 11th straight month
in September, according to a private sector survey of factory
managers. In the euro zone, a downturn in activity in the
service sector steepened this month at the fastest pace since
July 2009.
    The euro fell 0.8 percent to $1.2948, off Monday's
four-month peak of $1.3169. It hit a session trough of $1.2919
on Reuters data, having dropped through stop-loss orders at
    Against the yen, the euro shed 0.8 percent to trade at
101.39 yen.
    Spanish 10-year borrowing costs fell to their lowest level
since January at an auction on Thursday, but the news offered
little support to the euro as uncertainty about whether Madrid
would seek a bailout unnerved investors. 
    "Rather than being viewed as a positive, it's almost being
viewed as a negative in the sense that it is going to
potentially delay the timeframe in which Spain may actually
request an official bailout," said Gareth Sylvester, senior
currency strategist at Klarity FX in San Francisco.
    Spain has been dithering on formally requesting financial
aid that could allow the European Central Bank to buy its bonds.
    Some analysts said the euro's losses could be limited by the
European Central Bank's plan to intervene in bond markets to
lower borrowing costs and after the Federal Reserve unleashed a
fresh bout of monetary easing last week.
    "I think euro/dollar will form a base to the extent this
weakness is about global risk appetite which is backstopped by
the Fed, and we think Spain will eventually ask for a bailout,"
said Adam Cole, head of FX strategy at RBC Capital Markets in
London "I would be surprised if we get back down below $1.28."
    The dollar fell 0.1 percent to 78.30 yen, pulling
away from a one-month high of 79.21 yen set on Wednesday after
the BOJ boosted its asset-buying program to help fuel the
country's economic recovery. 
    Andrew Robinson, FX analyst for Saxo Capital Markets in
Singapore, said the dollar was likely to trade in a range of
roughly 77 to 79 yen over the next few weeks.
    Any drop toward 77 yen could spark fresh jitters about the
potential for yen-selling intervention by Japanese authorities.
The dollar hit a seven-month low of 77.11 yen last week.

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