LOS ANGELES (MarketWatch) � The dollar rose against most major rivals Tuesday, holding to higher ground following a round of upbeat U.S. economic data and as Federal Reserve Chairman Ben Bernanke backed the central bank�s stimulus efforts.
The ICE dollar index DXY , which measures the greenback against six major global currencies, traded at its highest level of the year as it reached 81.948, according to FactSet data. It settled around 81.852 versus 81.766 late Monday.
The WSJ dollar index XX:BUXX �, which captures the currency�s moves versus a slightly wider basket of rival units, advanced to 72.70 from late Monday�s close at 72.62.
The greenback found support after separate reports showed sales of new U.S. homes jumped to their highest pace since mid-2008, home prices in 2012 posted their best gain in seven years, and consumer confidence climbed in February, reaching its highest level in three months.
Consumer confidence sank in January because of concerns over higher payroll taxes and fiscal uncertainty. See: Consumer confidence jumps in February.
Click to Play Bernanke backs stimulusMarket experts were hoping for a dovish message from Fed Chairman Ben Bernanke ... and they got exactly what they wanted.
The reports arrived on the same day that Fed Chairman Bernanke in congressional testimony said he favored continuing the $85 billion-per-month bond-buying program, and that the benefits of the asset purchases are �clear.�
The dollar on Tuesday was also aided by its safe-haven status with the resumption of political risk in Italy, said Richard Franulovich, chief currency strategist for Westpac Institutional Bank.
Italy�s parliamentary election produced no clear overall winner, raising the prospect of a weak, broad coalition or fresh elections. Both scenarios leave investors fearing gridlock that could paralyze policy makers, underlining worries about the ability of Europe�s third-largest economy to get its debt burden under control. See: 'Ungovernable' Italy: Debt crisis back on table.
�The fact that the dollar hasn�t necessarily made new highs against the euro...you could argue that Bernanke�s dovish commentary limited the upside scope of the dollar,� Franulovich said. �But I think it�s a matter of time that the dollar hits new highs against many currencies, including the yen,� with near-term risks including Italy�s bond auction on Wednesday and automatic U.S. spending cuts set to go into effect on Friday.
The likelihood that European Central Bank President Mario Draghi will underscore conditions for access to its bond-buying program by countries under financial stress, �is not good news for the euro,� as well, said Franulovich. The ECB�s meeting next week will come as investors consider the impact of political instability in Italy on the country�s austerity program. See: ECB bond-buying program may not be there to save Italy.
�The problem for Italy is that political inertia risks stalling the reform process,� said Jeremy Stretch, currency strategist at CIBC in London.
Rising Italian bond yields � and a widening spread between peripheral euro-zone bond yields and German bunds � correlate to a weaker euro, he said. Continued political fears will limit the scope for a euro rebound. Read The Tell: ECB bond-buying program may not be there to save Italy.
The yield on the 10-year Italian government bond IT:10YR_ITA �rose 47 basis points to 4.83%. Italian stocks plunged, dragging Europe lower. See: Europe stocks sink on election gridlock.
Among major currency pairs, U.S. dollar USDJPY �traded at 91.88 yen versus �91.83 on Monday, but sharply lower than �93.43 on Friday. Bernanke during his testimony also said he supported the new stimulus programs of Japan�s Prime Minister Shinzo Abe, signaling the Fed chief isn�t worried about any so-called currency war.
The British pound GBPUSD changed hands at $1.5128, compared with $1.5160, while the Australian dollar AUDUSD traded at $1.0233 compared with $1.0327.
No comments:
Post a Comment