Dollar gains, reversing euro’s earlier fortunes

NEW YORK - The dollar rose against the euro on Tuesday, reversing the single currency’s earlier gains, as investors grew more risk averse and sought safety in both the dollar and the yen.

By (Reuters)

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Published: Tue 18 May 2010, 9:36 PM

Last updated: Thu 2 Apr 2015, 9:47 AM

There was no fundamental reason for the moves, analysts said, but a breakdown of support on dollar/yen prompted more selling, analysts said.

After the dollar tested technical support at 92.63 yen, sell orders kicked in, said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

“There is some fine-tuning of risk positioning,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

The dollar rose as high as 92.96 yen before giving up those gains; it last traded little changed at 92.58 yen, off the session low of 92.34 yen.

The strength in the yen fed through to a decline in the euro against the Japanese currency, with the euro giving up all the session’s gains and falling 0.2 percent to 114.43 yen.

The euro’s weakness against the yen in turn impacted the euro/dollar rate, though investors had been looking for a reason to sell the single currency after it rallied from a four-year low on Monday.

The euro was last down 0.2 percent at $1.2375 off the session high of $1.2444. It touched $1.2234 on Monday.

“We believe the ‘breather rally’ in EUR merely represents a selling opportunity, as the currency will be plagued by austerity in some countries and loan guarantees out of the other countries — hardly a recipe for a buoyant regional economy and/or stronger currency,” said T.J. Marta, chief market strategist at Marta on the Markets LLC, long before the euro fell on the day.

Earlier, the euro had risen against the dollar on optimism that financial aid for Greece was coming through as planned.

Officials said Greece received a 14.5 billion euro emergency loan from the European Union and would use some of the money to repay in full an 8.5 billion euro bond maturing on Wednesday.

That helped narrow the 10-year Greek/German government bond yield spread and cut the cost of insuring against a Greek default, supporting the euro.

Details of the European Central Bank’s bond-buying program announced on Monday and its operation to drain extra liquidity created by buying debt also eased concerns the bond purchases would lead to a form of quantitative easing.

The euro also got endorsement from Poland, with Polish Finance Minister Jacek Rostowski saying his country could adopt the euro as soon as 2014 under favorable circumstances.

But as the euro gave up gains on Tuesday, the dollar rose 0.1 percent to 86.268 against a basket of major currencies including the Swedish crown, not far from 87.063 hit on Monday, its highest since March 2009.

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