MW: Dollar falls versus euro as concerns about Greece fade
By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar lost ground against a rebounding euro on Tuesday as investors showed a bit more comfort with European officials' response to Greek debt problems and a renewed willingness to buy assets like stocks and oil.
The European single currency rose to $1.3647, up 0.4% from Monday. It had fallen to its lowest level in nearly nine months versus the dollar last week amid fears over Greece's budget woes and the potential for default.
The dollar index (DXY 80.19, -0.14, -0.17%) , which tracks the greenback against a trade-weighted basket of six major currencies, traded at 80.198, little changed from Monday.
The dollar rose 0.1% to buy 90.10 Japanese yen after being lower before some early U.S. data.
The dollar had little reaction to the New York Federal Reserve Bank's report showing factory activity in the region expanded at a faster pace in February. The bank's Empire State Manufacturing index rose to 24.9 in February from 15.9 in January.
The greenback recovered a little after a Treasury Department report showed total holdings of U.S. equities, notes and bonds increased by a net $63.3 billion in December, down from $126.4 billion in the previous month. Purchases of Treasurys by foreign private and government investors also slowed.
Still, economists at Nomura Securities said the report "confirms that the appetite for US treasuries among private foreign investors remains strong."
Still to come, at 1 p.m. Eastern time, a report is expected to show confidence among U.S. homebuilders improved slightly.
Fed speakers
Traders will also listen for any comments about the economic outlook or monetary policy from a trio of Federal Reserve officials.
Kansas City Fed President Thomas Hoenig will speak at a budget policy forum at 12 p.m. Eastern. Atlanta Fed President Dennis Lockhart will speak on early education at 12:30 p.m. and Minneapolis branch President Narayana Kocherlakota speaks on the economy at 12:45 p.m.
In an earlier indication of more comfort among investors to move towards riskier assets, U.S. stocks opened higher following Monday's Presidents Day holiday, while oil prices rose more than 2%.
Strategists at BNP Paribas strategists said the euro could be in for a short-term rally as European finance ministers demanded fresh budget cuts from Greece if a review of the country's debt-slashing measures doesn't meet approval next month.
But a continued nervousness over Greece's debt problems and uncertainty over a European Union rescue effort are likely to limit any bounce by the single currency. Read about E.U. pressure on Greece.
Adding support for the euro, the ZEW indicator of economic sentiment for Germany fell to 45.1 in February from a reading of 47.2 in January, the Mannheim-based Center for European Economic Research, or ZEW, said Tuesday. Economists had forecast a decline to 40, according to Action Economics.
The euro has gained "on a combination of the strong ZEW and more pressure on Greece to take decisive action to get out of its own fiscal mess," said T.J. Marta, chief market strategist at Marta on the Markets.
Australia, U.K.
Risk appetite was boosted earlier, with the Australian dollar rising 0.9% against its U.S. counterpart after minutes of the most recent Reserve Bank of Australia meeting suggested that more interest-rate increases are coming. See story on RBA minutes.
Higher interest rates typically boost currencies because they raise the returns on assets denominated in those currencies.
The British pound showed little immediate reaction to data that showed British inflation jumped at an annual rate of 3.5% in January. Bank of England Governor Mervyn King said, in a letter to Chancellor of the Exchequer Alistair Darling, that the jump was expected to be temporary and that inflation would likely fall back below target later in the year. Read about the U.K. inflation jump.
