DJ WORLD FOREX: Dollar Down Vs Euro After Spanish Bond Auction Succeeds

By Don Curren    OF DOW JONES NEWSWIRES  
 
TORONTO (Dow Jones)–The euro rose against the dollar Thursday as a successful bond auction in Spain assuaged fears about the euro-zone debt crisis and helped restore a selective demand for risk. 

The euro reached at one point a high of $1.2413, its peak level since May 28, according to EBS via CQG. But it retreated as the Dow Jones Industrial Average slipped into the red in late-morning trading. 

The positive risk sentiment that supported the euro dimmed after a private index of U.S. leading indicators and a manufacturing report from the Federal Reserve Bank of Philadelphia disappointed investors.

\”It\’s been a pendulum swing between risk-on/risk-off,\” said Rahim Madhavji, president of Knightsbridge Foreign Exchange in Toronto.

The safe-haven yen also gained ground on the greenback. \”A lot of the risk mood was probably sapped by a much-weaker-than-expected Philly Fed number,\” said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto.  

In late afternoon trading Thursday, the euro was at $1.2388 from $1.2311 late Wednesday, according to EBS via CQG. The dollar was at Y91.00 from Y91.42 and the euro was at Y112.72 from Y112.56. The U.K. pound was at $1.4820 from $1.4737. The dollar was at CHF1.1119 from CHF1.1297.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 85.657 from 86.142.  

Even though the euro advanced on the day in the absence of any fresh bad news, trading remains jumpy. Spain\’s better-than-expected auction helped curb fears that the country could be headed toward a Greek-style spiral, but investors remain skittish about more bad news. 

\”The market is still waiting for another shoe to drop in Europe, as the problems have not fully been dealt with,\” said Joseph A. LaVorgna, chief U.S.
economist at Deutsche Bank in New York. 
  Despite strong demand in the Spanish Treasury\’s auction of EUR3.5 billion in 10- and 30-year bonds, the sale came with higher yields. 
  While the euro appears to have found something of a bottom on a short-term basis, it remains vulnerable in the longer term, said Madhavji of
Knightsbridge Foreign Exchange. 
  \”There\’s still going to be a lot of resistance on the upside for the euro … until there is a long-term track record of stability in the [currency],\” he said. 
  Other risk-sensitive currencies, such as the Canadian and Australian dollars, did not perform as strongly as the euro, suggesting the more positive
attitude toward risk was largely confined to European-area currencies. The British pound also rallied Thursday. 
  In another key development for currencies overnight, the Swiss National Bank appeared to soften its tone in regard to the franc\’s appreciation. The
SNB has been intervening heavily in the market of late, buying euros and selling francs in an effort to limit the appreciation of its currency. In New York
trading, the euro had fallen at one point to CHF1.3742, just above its all-time low of CHF1.3735 notched on June 9. It had appreciated to CHF1.3772 in
late afternoon trading. 
   With the ICE Dollar Index weakening, Deutsche Bank\’s PowerShares U.S. Dollar Index Bearish exchange-traded fund was up 0.56% from late
Wednesday, while its PowerShares U.S. Dollar Index Bullish was down 0.60%. The two exchange-traded funds are based on Deutsche Bank currency
futures indexes, whose composition mirrors that of the ICE\’s Dollar Index.