MW: Dollar mostly higher; euro recovers from early weakness
By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The dollar rose versus the Japanese yen and British pound on Wednesday, but the euro managed to erase an earlier loss versus the greenback after stronger-than-expected manufacturing data from France and Italy.
The euro traded at $1.3620, up from $1.3598 in late North American trading Tuesday. The single currency had been under pressure in early activity, knocked down in part by weaker-than-expected German trade data.
The dollar index (DXY 80.58, -0.01, -0.02%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 80.609, up slightly from 80.580 late Tuesday.
The greenback rose to buy 90.75 yen, up from 89.98 yen late Tuesday. Throughout the credit crisis and recession, the Japanese currency was one of the biggest beneficiaries of investor demand for a relatively safe haven from the storms in other markets. As the crisis abated and signs of economic recovery grew, the yen has fallen.
Data from Italy and France showed stronger-than-expected jumps in manufacturing output in January, which analysts said should bode well for euro-zone output figures due for release on Friday. Read about factory output in Italy, France and Britain.
Separately, Germany's exports unexpectedly fell in January, according to government data. Read about Germany's trade data.
Analysts also paid close attention to data showing China's trade surplus narrowed last month.
China's trade surplus narrowed further in February to $7.6 billion from $14.2 billion in January. When compared with the same month last year, both exports and imports grew at a higher-than-expected rate, reflecting growing domestic consumption in China and more demand abroad for Chinese goods, aided by a cheap yuan. Read more on China trade data.
"The Chinese currency is undervalued and global demand is alive and kicking," said Andrew Wilkinson, senior market analyst at Interactive Brokers. "In light of this data, the Japanese yen slipped against all of its major trading partners as investors lose the argument that there is an ongoing need to maintain a stake in safe haven units."
In currency crosses closely watched as indications of risk appetite, the euro rose 0.8% versus the yen and the Australian dollar jumped 1.1% against the Japanese currency in recent action.
Swiss, U.K. activity
The euro, meanwhile, posted a temporary jump versus the Swiss franc on rumors the Swiss National Bank intervened to sell francs versus the single currency. Read story on rumor Swiss intervention.
The British pound (CUR_GBPUSD 1.4931, -0.0068, -0.4540%) , meanwhile, skidded to $1.4944, from $1.4991 on Tuesday.
The Office for National Statistics said U.K. manufacturing production fell by 0.9% in January, compared to expectations for a 0.2% monthly rise.
"The almost relentless flow of negative data surprises for the U.K. and uncertainty about the U.K. monetary and fiscal policy outlook is putting upward pressure on the pound's risk-premium," said currency strategists at Barclays Capital.
