MW: U.S. dollar gains ground as trade becomes two-way
U.S. dollar gains ground as trade becomes two-way
By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The dollar gained some ground against other currencies Thursday, a day after sinking to a fresh 14-month low against the euro, with overnight concerns about China fueling some risk aversion across markets.
Amid concerns that global equity markets might be over-extended, Asia stocks came under pressure over night on news that China's economy grew 8.9% year on year in the third quarter, missing estimates by a tenth of a percentage point. Some also concerns that China might further curb loose bank lending.
The euro breached the key $1.50 level for the first time since August 2008 on Wednesday, but failed to gain much further. On Wall Street, volatility in stocks kept benchmark indexes on either side of neutral, after ending Wednesday lower. Declines in overseas equities started the dollar's bounce.
"There has been some re-evaluation of risk today," said Christopher Sullivan, who manages about $1.5 billion in fixed-income assets as chief investment officer at United Nations Federal Credit Union. "The dollar benefits from risk aversion. There was also a bounce of the psychologically-important $1.50 level."
The dollar index (DXY 75.28, +0.31, +0.41%) , a measure of the U.S. currency against a trade-weighted basket of rivals, stood at 75.271, up from 74.983 in North American activity late Wednesday, when it hit a fresh 14-month low.
The dollar bought 91.54 Japanese yen, compared to 91.03 yen on Wednesday.
The euro traded at $1.4995, recovering some earlier losses but still down from $1.5040 late Wednesday. Read more about the euro's rise.
It's not just strength in the euro setting off alarms for export-intensive nations that share the currency. Both the Bank of Canada, after its meeting this week, and the Reserve bank of Australia, in its meeting minutes, acknowledged the impact that strength in their respective currencies is having on the outlook for growth and interest rates,
"The pace of dollar weakness from here will be slower as there is more two-way risk in the market," said Sophia Drossos, co-head of global foreign-exchange strategy at Morgan Stanley. "We sense that dollar weakness is getting to a point that it's likely to have a more measurable impact on other economies and policy makers are reacting to that."
The Australian dollar has soared almost 33% this year versus the greenback. The U.S. dollar has lost nearly 15% versus the Canadian currency since 2009 began.
Thursday's foreign-exchange trading keyed on pressure on equities that started in Asia, after China reported an 8.9% rise in third-quarter gross domestic product. That prompted many to voice concerns that the nation would withdraw some of its stimulus programs. Read more about China's economic data.
The dollar index (DXY 75.28, +0.31, +0.41%) , a measure of the U.S. currency against a trade-weighted basket of rivals, stood at 75.271, up from 74.983 in North American activity late Wednesday, when it hit a fresh 14-month low.
The dollar bought 91.54 Japanese yen, compared to 91.03 yen on Wednesday.
The euro traded at $1.4995, recovering some earlier losses but still down from $1.5040 late Wednesday. Read more about the euro's rise.
It's not just strength in the euro setting off alarms for export-intensive nations that share the currency. Both the Bank of Canada, after its meeting this week, and the Reserve bank of Australia, in its meeting minutes, acknowledged the impact that strength in their respective currencies is having on the outlook for growth and interest rates,
"The pace of dollar weakness from here will be slower as there is more two-way risk in the market," said Sophia Drossos, co-head of global foreign-exchange strategy at Morgan Stanley. "We sense that dollar weakness is getting to a point that it's likely to have a more measurable impact on other economies and policy makers are reacting to that."
The Australian dollar has soared almost 33% this year versus the greenback. The U.S. dollar has lost nearly 15% versus the Canadian currency since 2009 began.
Thursday's foreign-exchange trading keyed on pressure on equities that started in Asia, after China reported an 8.9% rise in third-quarter gross domestic product. That prompted many to voice concerns that the nation would withdraw some of its stimulus programs. Read more about China's economic data.
