HONG KONG (MarketWatch) — The U.S. dollar weakened on Thursday, losing ground against the euro on hopes euro-zone leaders will boost the size of the region’s firewall to contain the debt crisis.
The ICE dollar index DXY -0.16% , which measures the greenback’s performance against a basket of six other global currencies, fell to 79.085 in East Asian afternoon hours, down from 79.253 in North American trade late Wednesday.
The euro EURUSD +0.07% appreciated to $1.332 from $1.3276 after a Bloomberg report that the 17-nation currency bloc’s finance ministers were weighing a plan to increase the size of a firewall, designed to prevent a contagion of the region’s sovereign-debt crisis.
U.S. ticking fiscal time bomb
The U.S. is headed toward what Bernanke calls a "fiscal cliff" at year-end, including tax hikes and spending cuts. Photo: AP.
The report helped lift confidence among investors worried about a prospect that Spain might tap the European Union’s rescue fund.
“Over the short term, there appears to be little to jolt markets out of their stupor and if anything, [the euro] is likely to continue to drift higher according to our short-term quantitative models,” said Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole.
“The Ecofin meeting beginning tomorrow will likely give further support to the [euro], if as we expect, ministers bolster the euro-zone ‘firewall,’” he said.
Japan’s currency climbed against major rivals to reflect investor risk-aversion, as Asian equity markets mostly declined Thursday amid worries about the global economic outlook. Read Asia Markets.
The dollar USDJPY -0.58% was changing hands for ¥82.67, compared with ¥82.78 late Wednesday. The euro EURJPY -0.53% , meanwhile, fell to ¥110.16, compared with ¥110.43 the previous day.
Also reflecting such worries, the Australian dollar AUDUSD -0.18% declined to $1.037 from $1.0395 the previous day in North America. Read report on the Australian dollar’s outlook.
The aussie’s fall came amid worries about a slowdown for the Chinese economy. Read MarketWatch survey results on a possible China hard-landing.
Among other major currencies, the British pound GBPUSD +0.14% rose a little to $1.590 from $1.5895.
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