Forexpros – The dollar fell against major currencies Wednesday as investors worldwide ditched the greenback and took up riskier positions elsewhere after a stream of positive economic data hit the newswire all day.
During Asian morning trade, the greenback was down against the euro, with EUR/USD gaining 0.39% to hit 1.3120.
Earlier during the day in Germany, business confidence numbers rose in December to 107.2 from 106.6 in November, outpacing market expectations.
In Spain, the government sold EUR5.6 billion at a bond auction, beating a target of EUR4.5 billion, which could lower borrowing costs in the overall economy as yields fell.
Falling yields came as welcome news.
While European Central Bank officials insist they cannot step in and buy government bonds directly to alleviate the debt crisis, they have made financing for banks more available via short-term loans, which primed demand for Spanish debt and pushed yields down.
Central bank officials says they cannot cave to market calls for direct bond purchases on the grounds that doing so would go against its mandate to keep prices stable.
Yet the market welcome the increased funding for banks on sentiment that the money will find its way increasingly back in government debt markets.
“By all accounts, the take-up is expected to be strong and markets would interpret this as positive,” said Geoffrey Yu, a currency strategist at UBS AG in London, in a note to clients, according to Bloomberg.
“Not only will some of the funding be recycled back into government debt, but banks would be able to secure financing for the immediate future and ensure financial stability in the coming quarters.”
Furthermore, oil markets rallied not only on sentiment that an improving U.S. economy will need more oil to grow, but supply fears escalated in Kazakhstan, where protests may disrupt production.
Tensions also ran high in Iran, which remains subject to accusations from the West of developing a nuclear program and may incur fresh economic sanctions.
The dollar often falls when oil rises.
The greenback, meanwhile, was down against the pound, with Cable up 0.07% at 1.5674.
Meanwhile, the dollar was down 0.04% against the yen, with USD/JPY trading at 77.86, and weaker against the Swiss franc, with USD/CHF trading down 0.23% at 0.9296.
The dollar was weaker against its counterparts in Canada, Australia and New Zealand, with USD/CAD down 0.30% at 1.0268, AUD/USD up 0.46% at 1.0127 and NZD/USD up 0.38% at 0.7710.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.18% at 80.08.
Later on Wednesday, Bank of Japan officials may speak on the health of the Japanese economy while the Bank of England will release the minutes of its most recent monetary policy meeting.
Canada will unveil retail sales figures while the U.S. National Association of Realtors will release existing home sales data.
New Zealand, meanwhile, will report on its latest gross domestic product figures.
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