Forexpros – The U.S. dollar maintained gains against its major counterparts on Wednesday, as lingering concerns over the euro zone’s sovereign debt crisis boosted demand for the safe haven greenback ahead of the of the Federal Reserve’s rate statement later in the day.
During U.S. morning trade, the dollar was higher against the euro, with EUR/USD slumping 0.49% to hit 1.2972.
Debt-strapped Greece was clinging to hope of a last minute bond swap deal to avoid a default after euro zone officials rejected a final offer from the country’s private bondholders.
Meanwhile, reports surfaced earlier that the European Central Bank was said to oppose restructuring its Greek bonds, adding to concern the nation will fail to win a deal to reduce its debt.
Further adding to the negative sentiment, the cost of insuring Portuguese government debt against default rose to a euro-lifetime high earlier, amid renewed fears the country may need a second international bailout.
The euro found brief support earlier after data showed that German business confidence improved more-than-expected in January, moving higher for the third consecutive month.
The greenback was up against the pound, with GBP/USD shedding 0.27% to hit 1.5583.
In the U.K., preliminary data showed earlier that the U.K. economy contracted more-than-expected in the final three months of 2011, shrinking for the first time since the fourth quarter of 2010.
Separately, the minutes of the Bank of England’s latest policy meeting revealed that policymakers believe that the U.K. is still facing considerable risks from the global economy.
Meanwhile, the greenback was higher against the yen and the Swiss franc, with USD/JPY jumping 0.73% to hit a two-month high of 78.24 and USD/CHF advancing 0.39% to hit 0.9313.
The yen weakened broadly after official data showed that Japan recorded its first annual trade deficit for 31 years in 2011, sparking concerns over the impact of the stronger yen and slowing global growth on the country’s largely export-driven economy.
However, the Bank of Japan said in its monthly report that the country’s exports are likely to increase moderately going forward, as recovery in overseas economies gathers pace.
The greenback was also stronger against the risk-sensitive Canadian, Australian and New Zealand counterparts, with USD/CAD gaining 0.3% to hit 1.0120, AUD/USD dipping 0.19% to hit 1.0474 and NZD/USD dropping 0.79% to hit 0.8055.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.47% to hit 80.37.
Earlier in the day, industry data showed that pending home sales in the U.S. fell more-than-expected in December, after rising to a 19-month high in the prior month.
Meanwhile, markets were looking forward to the conclusion of the Fed’s policy-setting meeting later in the day for indications on how Fed officials see Europe’s debt problems impacting the U.S. economy, as well as the need for further stimulus measures.
The Fed was also expected to provide, for the first time in the central bank’s history, interest rate forecasts to markets, as well as its quarterly economic projections, timed to coincide with a news conference by Fed Chairman Ben Bernanke.
Also Wednesday, the World Economic Forum kicked off its five-day annual meeting in Davos, Switzerland.
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