Forexpros – The U.S. dollar remained broadly higher against its major counterparts on Wednesday, as concerns over financial troubles in peripheral euro zone nations such as Italy and Spain continued to weigh on risk sentiment.
During European afternoon trade, the dollar was trading close to a two-year high against the euro, with EUR/USD dropping 0.46% to hit 1.2445.
The euro found brief support after the European Union Commission said the euro zone was faced with the prospect of “financial disintegration” and should use its permanent bailout fund to recapitalize banks directly, while also moving towards a banking union.
In its report on euro zone economic strategy, the EC also supported the idea of “joint debt issuance” or euro bonds, an idea which has met strong opposition from Germany.
Sentiment weakened broadly earlier after Italy’s Treasury auctioned EUR5.73 billion of 5-and10-year bonds in an auction which met with lackluster investor demand, while borrowing costs rose sharply, indicating that concerns over Spain and uncertainty over the outcome of elections in Greece next month are having a negative impact on Italy.
The yield on Spanish 10-year bonds climbed to 6.7% earlier Wednesday, nearing the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
Meanwhile, Greece concerns also reemerged after an opinion poll showed that anti-bailout party Syriza took the lead in the June 17 election race.
The greenback was also higher against the pound, with GBP/USD declining 0.29% to hit 1.5594.
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 was lower against the yen but traded higher against the Swiss franc, with USD/JPY dropping 0.54% to hit 79.07 and USD/CHF climbing 0.47% to hit 0.9651.
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 addition, the greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD rising 0.52% to hit 1.0276, AUD/USD dropping 0.79% to hit 0.9768 and NZD/USD shedding 0.65% to hit 0.7578.
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, the U.S. was to release a report on pending home sales.
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