Forexpros – The U.S. dollar was mixed against its major counterparts in choppy trade Tuesday, as rising Spanish borrowing costs and uncertainty over this weekend’s Greek elections supported safe haven demand.
During U.S. morning trade, the dollar traded lower against the euro, with EUR/USD gaining 0.08% to hit 1.2492. Hurting the greenback, the U.S. federal budget balance fell less-than-expected last month, official data showed on Tuesday.
In a report, Department of the Treasury said that U.S. federal budget balance fell to a seasonally adjusted -124.6B, from 59.1B in the preceding month.
Analysts had expected U.S. federal budget balance to fall to -125.0B last month.
The euro erased gains against the greenback after the yield on Spanish 10-year bonds hit a euro-era high of 6.82%, moving closer to the critical 7% threshold which precipitated bailouts in Greece, Ireland and Portugal.
The single currency rose to a session high against the greenback earlier, boosted by hopes that Spain’s bailout would help to stabilize markets.
However, Spain’s borrowing costs pushed higher amid uncertainty over the source of the rescue funds and whether the bailout repayments would add to the country’s already high borrowing costs.
Investors also remained jittery ahead of Sunday’s general election in Greece, which could decide the course of the country’s future in the euro zone.
The greenback was lower against the pound, with GBP/USD rising 0.34% to hit 1.5537.
Earlier Tuesday, official data showed that manufacturing output in the U.K. fell 0.07% in April, disappointing expectations for a more modest 0.2% decline and fuelling speculation over a fresh round of easing from the Bank of England.
Elsewhere, the greenback was slightly higher against the yen and the Swiss franc, with USD/JPY edging up 0.07% to hit 79.49 andUSD/CHF inching up 0.10% to hit 0.9628.
The yen weakened against the greenback in Asian trade, after the International Monetary Fund said earlier that the currency was “moderately overvalued,” and indicated that it supported Japan’s view on yen weakening interventions, given current market conditions.
In Switzerland, the government revised up its forecast for economic growth Tuesday, saying strong domestic demand was helping to offset the damaging effects of the strong Swiss franc on the country’s export sector.
The State Secretariat for Economics said it now expected growth of 1.4% for 2012, up from a March forecast for 0.8% growth, but warned that a severe recession in the euro zone would have a knock-on effect for Switzerland.
The greenback remained weaker against its Canadian, Australian and New Zealand counterparts, with USD/CAD shedding 0.27% to hit 1.0288, AUD/USD advancing 0.44% to hit 0.9906 and NZD/USDrallying 0.72% to hit 0.7744.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was almost unchanged on the day, inching up 0.01%, to trade at 83.07.
In the U.S., official data showed that import prices fell broadly in line with market expectations in May, while the previous month’s figure was revised to a flat reading.
The U.S. Bureau of Labor Statistics said import prices fell by a seasonally adjusted 1.0% in May, in line with expectations.
Import prices for April were revised to a flat reading from a previously reported decline of 0.5%.
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