MW: Dollar slightly lower versus euro as Greek worries ease
Aussie dollar dives after central bank surprises markets
By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar lost some ground versus the European single currency Tuesday as tensions surrounding Greece's fiscal problems faded.
The biggest mover among major currencies was the Australian dollar, which lost more than 1% versus the U.S. dollar and Japanese yen, after the Reserve Bank of Australia surprised markets by holding its policy rate unchanged.
The euro (CUR_EURUSD 1.40, +0.00, +0.12%) traded at $1.3943 versus the dollar, up from $1.3929 in North American activity late Monday.
The dollar index (DXY 79.19, -0.05, -0.06%) , which tracks the greenback against a trade-weighted basket of six major currencies, fell to 79.136 from 79.229 in late Monday's North American trading.
The dollar bought 90.43 yen, down from 90.71 yen.
The dollar pared some losses after Treasury Secretary Timothy Geithner told Congress said the White House will seek to take the first critical steps to control the deficit, but the U.S. can't make deep and immediate budget cuts because it would damage the recovery and only exacerbate fiscal challenges.
Traders will also be listening to comments from Paul Volcker, President Obama's economic adviser, for details on his financial reform proposal.
The euro had tumbled to a seven-month low versus the dollar last week as Greek bond yields soared in reaction to concerns about Athens' ability to meet its financing needs and to put its budget in order. Yield spreads versus German government bonds have narrowed this week.
The European Commission, the executive arm of the European Union, is set Wednesday to decide whether to formally accept Greece's budget plan. Greece aims to slash the deficit from a level equal to nearly 13% of gross domestic product last year to less than 3% -- the E.U. limit -- by 2012.
Brussels is expected to largely accept the plan after a spokeswoman on Monday said the goals appeared achievable but were subject to risks.
The biggest mover among major currencies was the Australian dollar, which lost more than 1% versus the U.S. dollar and Japanese yen, after the Reserve Bank of Australia surprised markets by holding its policy rate unchanged.
The euro (CUR_EURUSD 1.40, +0.00, +0.12%) traded at $1.3943 versus the dollar, up from $1.3929 in North American activity late Monday.
The dollar index (DXY 79.19, -0.05, -0.06%) , which tracks the greenback against a trade-weighted basket of six major currencies, fell to 79.136 from 79.229 in late Monday's North American trading.
The dollar bought 90.43 yen, down from 90.71 yen.
The dollar pared some losses after Treasury Secretary Timothy Geithner told Congress said the White House will seek to take the first critical steps to control the deficit, but the U.S. can't make deep and immediate budget cuts because it would damage the recovery and only exacerbate fiscal challenges.
Traders will also be listening to comments from Paul Volcker, President Obama's economic adviser, for details on his financial reform proposal.
The euro had tumbled to a seven-month low versus the dollar last week as Greek bond yields soared in reaction to concerns about Athens' ability to meet its financing needs and to put its budget in order. Yield spreads versus German government bonds have narrowed this week.
The European Commission, the executive arm of the European Union, is set Wednesday to decide whether to formally accept Greece's budget plan. Greece aims to slash the deficit from a level equal to nearly 13% of gross domestic product last year to less than 3% -- the E.U. limit -- by 2012.
Brussels is expected to largely accept the plan after a spokeswoman on Monday said the goals appeared achievable but were subject to risks.
"Stabilization of the Greek bond markets ahead of tomorrow's E.U. verdict on the Greek budget plan has provided only limited support for the euro," strategists at Brown Brothers Harriman said.
The dollar stayed down after a U.S. report showed pending home sales rose 1% in December. Analysts had expected a small gain after November's deep plunge, when the federal homebuyer tax credit was extended. See story on pending home sales.
Aussie rates
The lower-yielding U.S. dollar and yen both gained after the Reserve Bank of Australia surprised markets by holding its key rate at 3.75% after a string of increases at its previous three meetings. Analysts had widely expected a rate increase of 25 basis points to 4.0%. See story Australia's rate decision.
The Australia dollar fell immediately following the decision. It dropped to 88.12 U.S. cents in recent action, down from 89.27 U.S. cents before the announcement, and off 1% from the previous session. The Australian dollar dropped 1.4% versus the yen.
"There was plenty of disappointment at today's decision and financial pain became the driver of the exodus," Andrew Wilkinson, senior market analyst at Interactive Brokers, said in a note.
