Forexpros – The U.S. dollar was broadly higher against its major counterparts on Wednesday, as ongoing concerns over soaring Spanish borrowing costs and the country’s ailing banking system weighed on demand for riskier assets.
During European morning trade, the dollar was trading close to a two-year high against the euro, with EUR/USD sliding 0.37% to hit 1.2456.
The yield on Spanish 10-year bonds climbed to 6.6% earlier Wednesday, approaching the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
On Tuesday, the European Central Bank rejected Madrid’s plans to recapitalize troubled lender Bankia through the Spanish central bank’s lending facilities, pushing the country’s banking system closer to the brink of collapse.
The greenback was also higher against the pound, with GBP/USD declining 0.39% to hit 1.5580.
The Bank of England said that net lending to individuals rose more-than-expected in April, rising by GBP1.4 billion, beating expectations for a GBP1.2 billion increase.
A separate report showed that U.K. mortgage approvals ticked higher last month.
Elsewhere, the greenback edged lower against the yen but traded higher against the Swiss franc, with USD/JPY falling 0.20% to hit 79.33 and USD/CHF climbing 0.39% to hit 0.9643.
Bank of Japan policymakers signaled earlier that Japan will likely achieve the 1% inflation target without further monetary easing, but they did not rule out fresh stimulus measures if financial troubles in the euro zone were to exert strong downward pressure on Japan’s economy.
In Switzerland, the KOF Economic Research Agency said its economic barometer improved more-than-expected in May, rising to a seven-month high of 0.81 from 0.43 the previous month.
In addition, the greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD rising 0.40% to hit 1.0263, AUD/USD dropping 0.76% to hit 0.9773 and NZD/USD shedding 0.42% to hit 0.7596.
Australian data showed that retail sales fell unexpectedly in April, ticking down 0.2% after a 1.1% increase the previous month.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.32%, to trade at 82.73.
Later in the day, Italy was set to auction up to EUR6.25 billion of five and 10-year bonds, while the U.S. was to release industry data on pending home sales.
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