Forexpros – The U.S. dollar gained ground against most of its major counterparts Tuesday, as weak U.S. economic data and renewed euro zone debt worries triggered a flight away from riskier assets.
During late session U.S. trade, the dollar advanced against the euro, with EUR/USD falling 0.53% to hit 1.3074.
Yesterday, the euro was weakened as the yield on Portugal’s ten year bonds soared 199 basis points hitting a euro era record of 17.22%. Credit default swaps also climbed to a record in the struggling nation, indicating a 71% chance the government will default.
However Prime Minister Pedro Passos Coehlo calmed the markets by saying the debt is “perfectly sustainable” and there is no risk of writedowns on the bonds.
In other news, European leaders meeting in Brussels reached an agreement on a fiscal discipline treaty that includes sanctions for high deficit states and demands members to create laws to limit budget shortfalls.
In addition, euro zone leaders decided to launch the European Stability Mechanism on July 1st, one year ahead of the original plan.
However, Britain and the Czech Republic refrained from agreeing with the treaty.
Meanwhile, the unemployment rate hit a two decade low in Germany.
U.S. economic recovery was called in question as data indicated that consumer confidence and business activity both declined.
In additional U.S. news, the S&P/Case Shiller home price index dropped more than expected in November, falling for the 17th consecutive month.
The greenback traded lower against the pound, with GBP/USD advancing 0.28% to hit 1.5754.
Earlier in the U.K., data showed that bank lending remained tepid in December, rising GBP0.4billion, below the expectations for a GBP1.2 billion increase.
A separate report indicated that consumer confidence in the U.K. rose to its highest level in seven months in January.
Elsewhere, the greenback was lower against the yen and but higher against the Swiss franc with USD/JPY falling 0.13% to 76.25 and USD/CHF advancing 0.41% to hit 0.9207.
The strong yen prompted Japanese Finance Minister Jun Azumi to reiterate a warning that he will take “decisive steps” if speculators push the yen up too sharply.
The greenback was mixed against its Canadian, Australian and New Zealand counterparts with USD/CAD rising 0.10% to hit 1.0025, AUD/USD climbing 0.17% to hit 1.0617 and NZD/USD adding 0.75% to 0.8254.
The Canadian dollar was weakened after data indicated that the country’s economy contracted unexpectedly in November, due to low output in the energy sector.
Statistics Canada said GDP shrank by a seasonally adjusted 0.1%, missing expectations for growth of 0.02%.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, climbed 0.24% to hit 79.42.
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