Moody’s warning about Spain’s rating weighs on the euro
By Myra P. Saefong and Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar strengthened further against the euro and yen Wednesday, after Moody’s Investors Service put Spain’s Aa1 rating on review for a possible downgrade.
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 ratio should the cost of bank recapitalization prove to be higher than expected. Read about Moody’s action on Spain’s rating.
The euro (EURUSD 1.3348, -0.0033, -0.2466%) slipped to $1.3331, from $1.3411 Tuesday.
The dollar index (DXY 79.61, +0.24, +0.30%) , a measure of the greenback’s performance against a basket of six other currencies, climbed to 79.697 from 79.248 in late North American trading Tuesday. See Tuesday’s currencies column.
Against the Japanese yen, the dollar (USDYEN 83.8500, +0.2400, +0.2869%) rose to ¥83.90 from ¥83.46. See real-time currency quotes and tools.
The dollar held on to gains after a pair of U.S. reports showed U.S. consumer prices rose 0.1% last month and manufacturing in the New York area improved this month. Read more on CPI.
Separately, industrial production rose last month by more than economists surveyed by MarketWatch had anticipated.
Also, the Treasury Department said foreign investors bought a net $27.6 billion in long-term U.S. assets in October, down from the huge purchases of prior months as investors expected the Federal Reserve to begin a new bond-buying program. See more on TIC data.
On Tuesday, the Federal Reserve left its key interest rate and the size of its bond-purchase program unchanged, as had been widely expected, and a report showed retail sales jumped last month. See story on the Fed decision.
“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,” wrote Kathy Lien, director of currency research at GFT, in a note to clients issued late Tuesday in New York. Read about retail sales.
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.
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 two years.
