* Dollar rallies broadly; euro falls to 10-month low
* Fitch Ratings cuts Portugal’s sovereign rating
* Dollar index hits highest since May 2009
* Swiss franc climbs to record high against the euro (Recasts, updates prices, adds quote)
NEW YORK, March 24 (Reuters) - The U.S. dollar rose across the board on Wednesday, pushing the euro to a 10-month low after a rating downgrade for Portugal added to worries about debt levels and growth in the euro zone’s smaller countries.
Fitch Ratings lowered Portugal’s sovereign credit rating to AA-minus from AA, with a negative outlook. For details, see [ID:nWLB0770]
An already weak euro fell to the day’s low of $1.3329, according to Reuters data, its lowest since early May 2009.
Traders said a series of stop-loss orders had been hit near the $1.3440/30 area in Asia and later in Europe, which prompted further selling.
In the United States, economic reports on new orders for manufactured goods and housing data were mixed, although analysts said the lackluster figures would not prevent investors from buying more dollars. [ID:nN2396707] and [ID:nN2396501]
“Sovereign credit worries in Europe and Japan are leading to some general risk aversion,” said Michael Malpede, a market analyst at Easy Forex in Chicago.
In mid-afternoon trading in New York, the euro was down 1.2 percent at $1.3337 EUR=. It was the biggest one-day move since Feb. 17.
Against the yen, the dollar was 1.8 percent higher at 92.08 yen JPY= after touching a session high of 92.23 yen.
Michael Woolfolk, a senior currency strategist at BNY Mellon in New York, said the U.S. data was taking a back seat to general, speculative buying of the U.S. dollar after euro-dollar trades had a big technical breakdown overnight.
The downgrade of Portugal was a good excuse to keep selling euros, according to Woolfolk.
“This may be short-lived, but I think we could get to 1.30 in euro-dollar by the end of the week,” he said. “A move to 1.25 would probably require a more negative fundamental story on the euro zone and Greece in particular, but such a move can’t be discounted completely.”
The market will keep a close eye on a European Union summit on Thursday and Friday after Germany signaled for the first time that it may accept European financial aid for Greece as a last resort.
But Germany pegged its support to several conditions, including the need for the International Monetary Fund to make a “substantial contribution.” [ID:nLDE62M130]
“While the newsflow on the situation will ebb and flow, the overall conclusion is this: at no other time since the advent of the euro has the possibility for a break-up been this high,” said Andrew Busch, global FX strategist at BMO Capital Markets in Chicago in a note to clients. “It means risk-adverse selling will continue until the European Union and IMF can stabilize the debt situation and shift the narrative to a positive tone.”
Investors flocked to the perceived safety of the U.S. currency, pushing the dollar to its highest since May last year against a basket of currencies. The dollar index, a calculated measure that tracks the performance of the greenback versus six other major currencies, was up 1.2 percent at 81.857 .DXY.
The greenback hit a two-week peak against the Swiss franc at 1.0716 CHF=, according to Reuters data. The euro traded flat versus the Swiss franc at 1.4270 francs EURCHF= after hitting a record low at 1.4233, according to Reuters data.
Swiss National Bank President Phillip Hildebrand said on Tuesday the central bank would keep fighting excessive franc appreciation. But traders expect it to shy away from large-scale intervention as the economy recovers. [ID:nLDE62M0D9] (Reporting by Nick Olivari and Vivianne Rodrigues; Additional reporting by Steven C. Johnson in New York and Tamawa Desai in London; Editing by Dan Grebler)
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