Forex - Dollar plunges as E.U. summit fuels risk-on rally

Forexpros - The dollar dropped against major world currencies on Friday after the European Union took bold steps to ease credit conditions and fight its debt crisis, sparking a major risk-on rally in the process.

In U.S. trading on Friday, EUR/USD was trading up 1.70% at 1.2655.

An E.U. summit on Friday produced tough measures to fight the European debt crisis, sparking demand for higher-yielding assets like stocks, which sent the safe-haven dollar falling as investors took on risk.

Measures included allowing rescue funds to stabilize bond markets, directly recapitalize banks and the creation of a banking supervisory body later in the year.

The news sent Spanish and Italian bond yields dropping and stock prices soaring.

In the U.S., however, tepid economic indicators broke, sending the greenback dipping further.

The U.S. Bureau of Economic Analysis reported earlier that personal spending remained unchanged at a seasonally adjusted rate of 0.0% in May, slightly off from market calls for a gain of 0.1%

Meanwhile, the Thomson Reuters/University of Michigan final index of consumer sentiment fell to 73.2 in June from a final reading of 79.3 in May.

Analysts had forecast a 74.1 reading.

The greenback, meanwhile, was down against the pound, with GBP/USD up 1.04% and trading at 1.5680.

The U.S. currency was up against the yen, with USD/JPY trading up 0.51% at 79.86, and down against the Swiss franc, with USD/CHF trading down 1.67% at 0.9491.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 1.52% 1.0173, AUD/USD up 1.93% at 1.0238 and NZD/USD up 1.69% at 0.8016.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 1.37% at 81.76.

The dollar will focus next week to Friday's jobs report in the U.S.



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