Forexpros – The U.S. dollar surged against its major counterparts during Friday morning trade, as mixed economic signals triggered a flight to the safety of the greenback
During U.S. morning trade, the dollar was sharply higher against the euro, with EUR/USD plunging 0.91% to hit 1.3193.
Spurring the flight to safety, the International Swaps and Derivatives Association is considering triggering credit default swap payouts due to collective action clauses.
Despite ruling the European Central Bank’s exchange for Greek bonds for new securities, exempt from private investor losses, did not trigger the CDS payouts on Thursday.
Policy makers including former ECB President Jean Claude Trichet have spoken out against paying the swap contracts due to worries that traders would be encouraged to bet against failing nations thus worsen the euro zone crisis.
In economic news, euro zone producer price inflation climbed more than expected to a seasonally adjusted 0.7% last month from -0.2% the preceding month.
Analysts had forecast euro zone PPI to only rise to 0.5% last month.
Meanwhile, at the European Leaders summit in Brussels, euro zone heads declared a turning point in the debt crisis.
The leaders agreed that given the Greek aid package being started and a potential euro zone recession, its time to focus on a pro growth agenda despite the deficit control treaty signed today.
EU President Herman Van Rompuy stated, “Targets on deficits are intermediate targets, no aim in itself. The restoration of confidence in the future of the euro zone will lead to economic growth. That is our ultimate objective.”
German Chancellor, Angela Merkel, changed her stance on slowing down payment for the EUR500 billion permanent rescue fund to speeding up the payments at the summit.
Known as the European Financial Stability Facility, the permanent fund will go into operation in July.
The greenback traded higher against the yen and the Swiss franc, with USD/JPY advancing 0.59% to strike 81.60 and USD/CHF soaring 0.97% to hit 0.9148.
Earlier, government data indicated that capital spending in Japan increased by the most in five years during the fourth quarter, adding to indications that the economy is recovering.
In Switzerland, official data showed that the economy expanded at an annualized rate of 1.3% in the in the final three months of 2011, above expectations for a 1.1% increase.
A separate report showed that manufacturing activity in Switzerland improved more-than-expected in February, but remained in contraction territory for the fifth consecutive month.
The greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD climbing 0.25% to hit 0.9879, AUD/USD falling 0.57% to hit 1.0747 and NZD/USD giving back 0.73% to hit 0.8334.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, traded higher 0.71% to hit 79.40.
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