Forexpros – The U.S. dollar was mixed against its major counterparts on Tuesday, as market sentiment was dominated by doubts over whether European leaders will make progress in tackling the region’s debt crisis at an upcoming European Union summit.
During U.S. morning trade, the dollar was up against the euro, with EUR/USD shedding 0.28% to hit 1.2468.
The euro gave up modest early gains against the greenback after Spain saw short-term borrowing costs rise sharply at an auction of government debt.
Spain’s Treasury auctioned slightly more that the targeted amount of EUR 3 billion, selling EUR1.6 billion worth of three-month government bonds at an average yield of 2.36%, up sharply from 0.84% at a similar auction last month.
Spain also sold EUR1.48 billion of six-month debt at an average yield of 3.23%, up from 1.73% in May.
The spike in borrowing costs came following the mass downgrade of 28 Spanish banks by ratings agency Moody’s on Monday, after Spain’s government formally requested aid of up to EUR100 billion for its banks.
Following the auction, the yield on Spanish 10-year bonds rose to 6.77%, re-approaching the critical 7% threshold, which is widely viewed as unsustainable in the long term.
Meanwhile, Italy’s Treasury sold EUR2.99 billion worth of two-year bonds at an average yield of 4.71%, the highest since December.
Investors also remained jittery ahead of the upcoming EU summit, amid skepticism that leaders would make progress on greater fiscal integration and allowing the bloc’s rescue funds to buy government debt.
In the U.S., a report showed that U.S. consumer confidence declined more-than-expected in June, falling to the lowest level since January.
The Conference Board said its index of consumer confidence fell to 62.0 in June from a downwardly revised reading of 64.4 last month and disappointing expectations for a reading of 63.5.
A separate report showed that the Standard & Poor’s/Case-Shiller U.S. house price index fell at an annualized rate of 1.9% in April from a year earlier, better than expectations for a 2.5% drop.
The greenback was slightly lower against the pound, with GBP/USD adding 0.15% to hit 1.5597.
Earlier in the day, Bank of England Governor Mervyn King said an interest rate cut would be less effective in stimulating the U.K. economy than more quantitative easing.
In testimony to Parliament’s Treasury Committee, King said the outlook for the U.K. economy had deteriorated in recent weeks as a result of the ongoing debt crisis in the euro zone.
The comments came after official data showed that public sector net borrowing in the U.K. rose to GBP17.9 billion in May, up from GBP15.2 billion in the same month last year.
Elsewhere, the greenback was lower against the yen, but pushed higher against the Swiss franc, with USD/JPY down 0.27% to hit 79.45 and USD/CHF rising 0.26% to hit 0.9628.
The greenback was broadly lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD dipping 0.05% to hit 1.0284, AUD/USD rising 0.15% to hit 1.0024 and NZD/USD climbing 0.17% to hit 0.7886.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, inched up 0.05%, to trade at 82.69.
Later Tuesday, finance ministers from Germany, France, Italy and Spain were to meet in Paris, to hold talks ahead of the EU summit on Thursday and Friday.
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