Forexpros – The dollar soared against most major global currencies on Friday after Spain said it’s economy will remain mired recession for another year, sending investors rushing to the safety of the dollar.
In U.S. trading on Friday, EUR/USD was down 0.96% at 1.2163.
Spanish Budget Minister Cristobal Montoro said earlier that the recession gripping the country today will extend into next year, with gross domestic product falling 0.5 percent in 2013 instead of expanding 0.2 percent as originally forecast.
The news sent yields in Spanish government debt markets soaring to above 7%, a level deemed unsustainable by markets and illustrating a country in need of a bailout.
Investors rushed to safe-haven asset classes as part of a risk-off trading session, which fueled demand for the dollar especially.
The euro dipped to a two-year low against the greenback and fell to its a level against the yen not seen since 2000.
Eurozone ministers did sign off on terms to give Spain EUR100 billion in bailout money for its banking sector as well as for regional governments, though investors fear the country itself will need a sovereign rescue, further fueling dollar demand.
The regional government of Valencia in Spain, meanwhile, said it would need assistance from Madrid, which helped push the euro lower against the yen, also a safe-haven currency.
Earlier this year, the Catalonian government said it would financial assistance from the Spanish government, as the country wrestles with debt burdens stemming from the real estate collapse.
The dollar rose in recent sessions after Federal Reserve Chairman Ben Bernanke gave no indication during congressional testimony that the economy is in greater need of monetary stimulus despite softening economic indicators, including monthly jobs reports that have continued to disappoint.
Still, market talk the Fed will eventually stimulate the economy via monetary easing tools, which capped the dollar’s gains.
The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.70% at 1.5616.
The dollar was down against the yen, with USD/JPY trading down 0.13% at 78.48, and up against the Swiss franc, with USD/CHF trading up 0.95% at 0.9873.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.52% at 1.0126, AUD/USD down 0.51% at 1.0375 and NZD/USD down 0.55% at 0.7988.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.74% at 83.59.
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