Forexpros – The U.S. dollar was higher against its major counterparts on Tuesday, as investors judged that last week’s pact to bind EU economies closer together would fail to quell the region’s financial crisis.
During European afternoon trade, the dollar was up against the euro, with EUR/USD tumbling 1.02% to hit 1.3249.
EU leaders agreed to draft a new treaty to implement tighter fiscal consolidation across the euro zone and to provide EUR200 billion in loans to the International Monetary Fund to assist countries with debt problems.
But investors remained unsure over whether the measures would go far enough to tackle the region’s debt crisis after the European Central Bank indicated that it had no plans to increase its bond purchasing program, capping weekly bond purchases at EUR20 billion.
Earlier Monday, Standard & Poor’s chief European economist said Friday’s agreement was a significant step in resolving a “crisis of confidence,” but warned that time is running out and more action is needed.
The comments came after S&P placed the credit ratings of 15 euro zone members, including France and Germany, on watch for a potential downgrade last week.
Sentiment was also hit after ratings agency Moody’s warned that the euro zone debt crisis was still in a “critical” and “volatile” stage, adding that the region still faced increasing risks to cohesion.
The greenback was also higher against the pound, with GBP/USD falling 0.26% to hit 1.5624.
U.K. Prime Minister David Cameron vetoed EU treaty changes aimed at tightening fiscal rules after failing to secure concessions relating to London’s financial services industry.
Elsewhere, the greenback was stronger against the yen and the Swiss franc, with USD/JPY rising 0.33% to hit 77.87, and USD/CHF advancing 1.08% to hit 0.9331.
In Switzerland, official data showed that the number of people employed rose more-than-expected in the third quarter, but for the first time in two years the employment outlook indicator showed a very slight decline in a year-on-year comparison.
In addition, the greenback was sharply higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD surging 0.80% to hit 1.0251, AUD/USD tumbling 1.19% to hit 1.0097 and NZD/USD plunging 1.27% to hit 0.7656.
Earlier in the day, official data showed that Australia’s trade surplus increased less-than-expected in November. A separate report showed that Australian home loan approvals rose more-than-expected last month.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, jumped 1% to hit 79.93.
Also Monday, Italy’s Treasury sold the full targeted amount of EUR7 billion of 12-month government bonds at an average yield of 5.95% compared to 6.08% at a bond auction last month.
Following the auction, the yield on Italian 10-year government bonds climbed back towards the near unsustainable levels hit last month, rising to 6.91%.
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