Forexpros – The U.S. dollar extended gains against its major counterparts on Wednesday, as fresh concerns over the sovereign debt crisis in the euro zone sapped market sentiment and boosted demand for the safety of the greenback.
During U.S. morning trade, the dollar was higher against the euro, with EUR/USD falling 0.65% to hit 1.2694.
The euro fell after Fitch Ratings said the European Central Bank needs to do more to prevent the collapse of the euro, saying the bank should step up its bond purchasing program to support troubled euro zone states.
Elsewhere, revised data showing that the euro zone’s economy grew less than initially expected in third quarter of 2011 underscored fears over impact of the region’s financial crisis on the outlook for growth.
Markets were also jittery ahead of Thursday’s ECB policy meeting and government bond auctions by Spain and Italy later in the week.
The euro briefly trimmed losses earlier after German Chancellor Angela Merkel said Germany would be prepared to pay more capital into the European Stability Mechanism fund when it is launched later this year, before resuming its decline.
The greenback was sharply higher against the pound, with GBP/USD tumbling 0.80% to hit 1.5357.
In the U.K., official data showed that the goods trade deficit expanded more-than-expected in November as exports fell, increasing to GBP8.6 billion, compared with the deficit of GBP7.9 billion the previous month.
Analysts had expected the goods trade deficit to expand to GBP8.3 billion in November.
In addition, the greenback was stronger against the yen and the Swiss franc, with USD/JPY adding 0.15% to hit 76.95 and USD/CHF rising 0.55% to hit 0.9544.
Earlier Wednesday, Bank of Japan Governor Masaaki Shirakawa said governments must implement “necessary” reforms to aid the global economy, adding that the yen’s strength will “hurt the Japanese economy in the short term,” after the central bank lowered its economic assessment for a second straight month in December.
The greenback also posted gains against its counterparts in Canada, Australia and New Zealand, with USD/CAD rising 0.40% to hit 1.0194, AUD/USD slipping 0.30% to hit 1.0280 and NZD/USD dipping 0.08% to hit 0.7936.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, advanced 0.68% to hit 81.62.
Also Wednesday, Italian Prime Minister Mario Monti has said his country has enacted painful reforms and should no longer be seen as a “possible source of contagion for Europe”.
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