Forexpros – The U.S. dollar was broadly higher against the other major currencies on Monday, as market sentiment was hit by concerns that the European Central Bank may disappoint market expectations for action to stem the long running crisis in the euro zone.
During U.S. morning trade, the dollar was higher against the euro, with EUR/USD dropping 0.62% to 1.2243.
Expectations mounted that the ECB is set to announce fresh measures to tackle the crisis at Thursday’s policy meeting, after bank head Mario Draghi pledged last week to do whatever is necessary to preserve the euro.
But investors remained wary amid concerns that the ECB could disappoint market expectations.
Italy saw the yield on 10-year bonds fall below 6% for the first time since April at an auction of government debt earlier, indicating that investors now see Italian government debt as a somewhat safer investment.
But worries over the outlook for the euro zone persisted after official data showed that Spain’s economy contracted 0.4% in the three month to June, extending the recession into a third quarter.
A separate report showed that the European Commission’s index of economic sentiment across the euro area dropped to a 34 month low in July, with confidence in Spain, Germany and France all dropping sharply.
Meanwhile, investors were looking ahead to the outcome of the Federal Reserve’s policy setting meeting on Wednesday, amid speculation over whether the U.S. central bank will hint at further easing measures.
The greenback was also higher against the pound, with GBP/USD shedding 0.33% to trade at 1.5694.
In the U.K., official data showed that mortgage approvals fell to the lowest level in 18 months in June, while a separate report showed that net lending grew at the slowest pace in 12 months in July, underlining concerns over economic weakness.
The data came after data last week showed that the U.K. economy contracted significantly more-than-expected in the second quarter.
Elsewhere, the greenback was lower against the yen, with USD/JPY declining 0.33% to hit 78.18, but was higher against the Swiss franc, with USD/CHF climbing 0.60% to trade at 0.9810.
The greenback was mixed against its Canadian, Australian and New Zealand counterparts, with USD/CAD dipping 0.04% to 1.0025, AUD/USD adding 0.10% to trade at 1.0492 and NZD/USD easing 0.07% to 0.8087.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.34% to 82.96.
Elsewhere Monday, U.S. Treasury Secretary Timothy Geithner expressed confidence in economic reform efforts underway in the euro zone ahead of talks with German Finance Minister Wolfgang Schaeuble and ECB chief Mario Draghi later in the day.
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