Dollar index’s longest rally since 2008 halted
NEW YORK— The dollar turned down Thursday against a basket of currencies, halting its longest streak of gains since at least 2008, with the euro bouncing back from earlier weakness as Greece and a major Spanish bank garner some financial support, calming worried investors.
Greece on brink of breakdown
The Greek rescue plan is on the brink of collapse as participants in the weekend's elections have failed to form a government and the rescue package threatens to unravel the common currency.
The ICE dollar index DXY -.00% , which measures the greenback against a basket of six major currencies, turned down to 79.968, from 80.083 late Wednesday.
The index had advanced in the past eight sessions, its longest string of gains since at least September 2008.
The euro EURUSD +0.00% rose to $1.2980, from $1.2954 in late North American trading Wednesday. The euro had dipped as low as $1.2923 in earlier action, according to FactSet Research data.
The euro recovered following an announcement in the prior session that the European Financial Stability Facility will give Greece most of its next aid tranche on schedule.
Also late Wednesday, Spain moved to partly nationalize Bankia SA ES:BKIA -1.17% , that country’s fourth-largest lender, and is expected to further stabilize its ailing financial sector. Read story on Spain, Greece.
Across the Atlantic, U.S. stock markets opened higher, with the S&P 500 IndexSPX +1.00% up 0.7%, following jobless-claims data. See more on U.S. stocks.
“After eight straight days of weakness, the euro-dollar is finally getting some relief,” said Kathy Lien, director of currency research at GFT. “Risk appetite stabilized overnight, helping to lift currencies such as the euro.”
Reuters
While the news offers some limited stability, the euro remains destined to fall to $1.27 by the middle of the year, said strategists at Brown Brothers Harriman.
“We suspect none of the improvements are likely to prove lasting as these governments all continue to push austerity,” they wrote in a note.
Greece’s top two vote-winning parties in weekend elections have failed in efforts to form a coalition government, and a failure by the third-ranked party “would mean new elections to take place in June and yet another period of political uncertainty,” the Brown Brothers Harriman note stated.
Spanish markets are being helped by the Bankia news, but questions persist ahead of a wider-ranging bank overhaul plan expected to be made public Friday, the note added.
China, Bank of England
The dollar found support in earlier action after Chinese data showed a sharp drop in import and export activity during April. Read more on China’s trade data.
“The poor import number bodes ill for [gross domestic product] growth. It should be a wake-up call for policy makers to do more to stimulate domestic demand, and is likely to lead to further elevated fiscal spending and monetary easing,” said Dariusz Kowalczyk, a strategist at Crédit Agricole.
Gains made earlier this week for the dollar came as investors weighed the chances that Greece would exit the euro following the inconclusive weekend parliamentary vote.
Also Thursday, the British pound GBPUSD +0.00% traded at $1.6180, up from $1.6141 late Wednesday. The Bank of England, as expected, left its key lending rate unchanged at 0.5% and made no move to boost the size of its asset-purchase program. See full story on Bank of England.
The Australian dollar AUDUSD +1.00% rose to $1.0137 from its $1.0058 level late Wednesday after strong employment data for April. Read more on Australian jobs data
Against the safe-haven Japanese yen USDJPY +0.00% , the dollar reached ¥79.96, up from ¥79.65.
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