MW: Dollar gains versus euro amid lingering debt worries
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar was up slightly versus major rivals Tuesday, finding some modest support amid ongoing worries about debt problems in the euro zone after ratings agency Fitch warned that Portugal remained vulnerable to a downgrade.
Overall activity remained subdued, with little in the way of fresh economic data to drive activity, analysts said.
The euro changed hands at $1.3560 versus the dollar, down from $1.3636 in North American activity late Monday.
Remarks by analysts from Fitch Ratings at a London conference helped set the softer tone for the single currency, analysts said. They warned that Portugal's AA rating could be at risk of a downgrade if the government doesn't pick up the pace of fiscal consolidation. Read about Fitch comments on Britain, Portugal and Greece.
"Even though Fitch also stated that the contagion risk to Portugal and Spain from Greece is not great, there are sufficient worries in the market concerning EMU (economic and monetary union) to keep the euro" on the defensive, said Jane Foley, research director at Forex.com.
Portugal on Monday outlined a plan to cut its budget deficit from more than 9% of gross domestic product in 2009 to 2.8% by 2013. Read about Portugal's budget plan.
The euro has consolidated, however, after tumbling to a nine-month low versus the dollar last month amid fears of a Greek default.
The dollar index (DXY 80.78, +0.35, +0.43%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 80.735, up from 80.440 late Monday.
The British pound slipped to $1.4970 versus the dollar, down 0.5% on the day.
A warning by ratings agency Moody's Investors Service that it may cut ratings on some U.K. banks as the country's bailout program winds down contributed to the weaker tone, said strategists at Lloyds TSB. Read about the Moody's warning.
The dollar slipped to 89.82 yen, from 90.29 yen late Monday.
Currency investors in Asia were also focusing on developments in China, and clues as to the timing of allowing its yuan to appreciate.
China's foreign-exchange regulator reportedly said Tuesday said its currency is under pressure to appreciate because of attractive interest rates and speculative capital flowing into the country.
The comparatively high interest rate paid on yuan deposits and expectations the currency will rise are likely to attract greater inflows of investment capital, the director of the State Administration of Foreign Exchange (SAFE) said in a statement cited by various reports. Read more on China yuan.
