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Dollar slips vs euro on short-covering bounce, Greek relief

imageNEW YORK: The dollar skidded to a nearly two-week low against the euro on Tuesday on euro buying following weaker US economic data and easing concerns surrounding Greece’s debt load, while the Australian dollar plunged on a central bank rate cut.

A spell of weaker US data has dented confidence that the Federal Reserve will hike interest rates from rock-bottom levels by June, spurring many who had bet against the euro to ‘cover’ their short bets by rapidly repurchasing the currency.

That trend was bolstered Tuesday, a day after Greece’s new government proposed plans for ending a standoff with its creditors, easing concerns of a Greek exit from the euro zone. The euro hit $ 1.14675, its highest since Jan. 22.

“We’re building on a short-covering bounce in the euro helped by diminishing risks of a Greek exit,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. He said recent disappointing US data had “frayed” expectations that the Fed will hike soon.

Data Tuesday showed new orders for US factory goods fell sharply in December, continuing the wave of softer data. The euro remained not far from an 11-year trough of $ 1.1098 touched on Jan. 26, however, following the European Central Bank’s launch of a landmark bond-buying program.

The Swiss franc followed in the euro’s footsteps and rebounded modestly against the dollar after hitting a more than two-week low against the greenback on Monday.

The Australian dollar, meanwhile, was last down 1.4 percent against the greenback at $ 0.7692 after hitting a nearly six-year low of $ 0.7627 following the Reserve Bank of Australia’s decision to cut interest rates.

The move also pushed the New Zealand dollar to $ 0.7177, its lowest since early 2011.

“All the RBA wanted to do is what the euro zone has done, they wanted to depreciate their currency to the point where their exports were more attractive,” said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

The euro was last up 1 percent against the dollar at $ 1.14570.

The dollar was last down 0.42 percent against the Swiss franc at 0.92285 franc.

The dollar was mostly flat against the yen at 117.545 yen. The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.73 percent at 93.811.

Copyright Reuters, 2015

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