By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The U.S. dollar weakened Thursday as safe-haven buying in the wake of Chinese economic data gave way due partly to growing optimism that European officials are making slow progress on the euro zone’s sovereign-debt woes, strategists said.
The dollar index (DXY 78.79, +0.15, +0.19%) , which tracks the greenback against a basket of six other currencies, gave up an earlier gain to stand at 78.554, down slightly from 78.594 late Wednesday.
The euro (EURUSD 1.3448, -0.0030, -0.2227%) fetched $1.3496, up from $1.3469 in North American trading Wednesday.
A German news report on Wednesday said German officials were weighing a plan that would allow Greece to effectively restructure its sovereign debt by buying back Greek bonds on the secondary market using subsidized credits through the European Financial Stability Facility. The report was denied by the two nations’ finance ministries.
Other reports said officials were contemplating some sort of restructuring for Greece. The reports roiled European bond markets but failed to dent the single currency.
The underlying tone remains positive, Lloyds TSB strategists Adrian Schmidt and Kenneth Broux said in a note.
“While the market is skeptical that there will be any near-term solution which will restore confidence in the periphery, the rumors do suggest that the EU is at least addressing the issues,” they wrote.
Also, The Wall Street Journal reported late Wednesday that Spain is preparing to issue 3 billion euros ($4 billion) of debt in the days ahead in order to shore up its troubled savings banks, also known as cajas. The Spanish government is planning to raise as much as €30 billion in all, although the figure may turn out to be less, according to the report.
“We believe EUR/USD short-covering off the back of the stabilization of the European situation, coupled with a downtrend of U.S. 2-year yields, are possible reasons for the general USD decline,” said Tohru Sasaki, chief foreign-exchange strategist at J.P. Morgan Chase Bank in Tokyo.
Against the Japanese yen, the dollar (USDYEN 82.6000, +0.6700, +0.8175%) bought ¥82.23, up from ¥82.04 late Wednesday, and above overnight lows below ¥82. See real-time currency quotes and tools.
“Since the beginning of the week, USD has been one of the weakest currencies, while JPY has been one of the strongest currencies, causing USD/JPY to fall below ¥82 for the first time in two weeks,” he said in emailed comments Thursday.
Chinese economic data released Thursday suggested that more tightening steps could be on the way from Beijing because growth accelerated more than expected. This weighed on stock markets across the region Thursday. See more on broad-based pullback in major Asian stock markets.
China’s National Bureau of Statistics reported gross domestic product was up by 9.8% in the three months through December and by 10.3% for all of 2010. Read more on China GDP as well as inflation and other economic data.
Also Thursday, the British pound (GBPUSD 1.5962, -0.0036, -0.2250%) traded at $1.5967, down from $1.5986, and the the Australian dollar (AUDUSD 0.9891, -0.0114, -1.1394%) slipped 0.4% versus the U.S. unit to stand at 99.11 U.S. cents.
