Forexpros – The U.S. dollar remained lower against the other major currencies on Tuesday, as risk appetite sharpened amid growing optimism that the European Central Bank will soon act to stem the debt crisis in the euro zone.
During U.S. morning trade, the dollar was modestly lower against the euro, with EUR/USD rising 0.18% to 1.2422.
The euro was supported by expectations that the ECB will soon take steps to help lower Spanish and Italian borrowing costs after ECB head Mario Draghi indicated last week that the bank may restart its bond buying program.
Draghi said that any steps by the bank were conditional on euro zone governments experiencing difficulty on bond markets activating the bloc’s bailout funds to purchase government bonds and accepting strict conditions and supervision.
Investors were waiting to see if Spain would request assistance from the bloc’s bailout funds, which would allow the ECB to start buying Spanish government bonds.
Earlier Tuesday, a raft of weak euro zone data underlined concerns over the impact of the long running debt crisis on the outlook for growth in the region.
German factory orders tumbled 1.7% in June, almost twice as much as expectations for a 1.0% decline.
A separate report showed that Italian gross domestic product contracted by 0.7% in the second quarter, slightly worse than expectations for a 0.6% contraction.
The greenback was also lower against the pound, with GBP/USD up 0.33% to hit 1.5653.
In the U.K., official data showed that manufacturing output contracted sharply in June, falling 2.9%, but beat expectations for a 4.1% decline.
U.K. industrial output fell 2.5% in June, defying expectations for a 3.4% drop.
Elsewhere, the greenback was higher against the traditional safe haven yen, but slid lower against the Swiss franc, with USD/JPY gaining 0.56% to 78.68 and USD/CHF easing down 0.18% to 0.9669.
The Swiss National Bank said earlier that its foreign currency reserves climbed to a record CHF406.5 billion in July, from an upwardly revised CHF365.1 billion in June, indicating that the central bank has continued its currency market intervention to defend the 1.20 per euro exchange rate floor.
Elsewhere, official data showed that consumer price inflation in Switzerland fell by 0.5% in July, slightly less than expectations for a 0.6% decline.
The greenback was mixed against its Canadian, Australian and New Zealand counterparts, with USD/CAD down 0.31% to 0.9970, AUD/USD slipping 0.07% to 1.0562 and NZD/USD falling 0.29% to 0.8174.
In Canada, official data showed that the total value of building permits issued in June fell by 2.5% to CAD6.8 billion, against expectations for a 4.0% drop, following a 7.1% increase in May.
Meanwhile, Canada’s Ivey Purchasing Manager’s Index rose to 62.8, in July, outstripping expectations for a rise to 53.0, after a reading of 49.0 in June.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.09% to 82.20.
Later in the day, Federal Reserve Chairman Ben Bernanke was to speak at an event in Washington DC.
Forexpros
