U.S. Fed decision, sales data upbeat; more economic figures on tap
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) — The U.S. dollar strengthened further against the euro during Tokyo’s late afternoon trading Wednesday, after Moody’s Investors Service said it put Spain’s Aa1 rating on review for a possible downgrade.
The greenback also saw support from upbeat data on the nation’s retail sales as well as the Federal Reserve’s decision to stand pat on interest rates as expected.
Credit rating agency Moody’s noted Spain’s vulnerability to funding stress given its high refinancing needs in 2011, as well as a potential rise in the public debt ration should the cost of bank recapitalization prove to be higher than expected so far. Read more about Moody’s action on Spain’s rating.
Against that backdrop, the euro (EURUSD 1.3316, -0.0067, -0.5008%) slipped to $1.3294, from $1.3411 Tuesday.
The dollar index (DXY 79.70, +0.34, +0.42%) , a measure of the greenback’s performance against a basket of six other currencies, climbed to 79.810 from 79.248 on Tuesday in late North American trading. See Tuesday’s currencies column.
But traders remained wary ahead of more measures of economic health, including data on consumer prices and industrial production, due out later in the U.S. See MarketWatch’s economic calendar.
“Stronger-than-expected consumer spending and the lack of any major surprises from the Federal Reserve has helped the dollar recover against the Japanese yen and European currencies,” Kathy Lien, director of currency research at GFT, in a note to clients issued late Tuesday in New York. Read about the rise in November U.S. retail sales.
On Tuesday, the Fed left its key interest rate and the size of its bond-purchase program unchanged as had been widely expected. See full story on the Fed decision.
However, the rally in the dollar has been “modest considering the breadth of good news,” said Lien. “With President [Barack] Obama’s tax cut plan passing the Senate, investors are still worried about the impact that it would have on U.S. fiscal finances.” Read more about the tax-cut deal.
Rating agency Moody’s Investors Service warned this week that if the package is passed in its current form, the outlook for the U.S. government’s Aaa rating could be downgraded to negative from stable within the next 2 years.
For now, against the Japanese yen, the dollar (USDYEN 83.9400, +0.2900, +0.3467%) traded at ¥83.84 up from ¥83.46. See real-time currency quotes and tools.
