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Dollar Weakens Ahead Of Spanish Budget

by Amwal Al Ghad English

The U.S. dollar edged lower on Thursday against major rivals as investors looked ahead to key developments in Spain this week, including the government’s budget, with a little bit of optimism.

The ICE dollar index , which measures the greenback against a basket of six major currencies, traded at 79.760, from 79.840 in late North American trading on Wednesday.

The euro reached $1.2877, from $1.2868.

Strategists at RBC Capital Markets said market moves in Asia on Thursday likely reflected “a creeping hope that today’s Spanish budget proves a near-term circuit breaker.”

“Leaks thus far suggest the budget will aim to satisfy possible conditionality imposed by a European Financial Stability Facility /European Stability Mechanism program, which has led to natural speculation that a formal request for at least an Enhanced Conditions Credit Line will soon be forthcoming,” they added.

The Spanish government is set to announce a new reform package and a budget likely to include more austerity measures on Thursday.

Results of stress tests for Spanish banks are due Friday, as is a review of Spain’s credit rating by Moody’s Investors Service, with a downgrade of Spain’s debt to junk status a possibility.

To date, the Spanish government has held off requesting a bailout from its European partners.

The strategists also said that risk was given “a small fillip” after the Chinese central bank made a record injection of liquidity this week. Read more on PBOC money market move.

In other currency moves, the British pound traded at $1.6183, from $1.6159.

Against the Japanese currency , the dollar declined to 77.658 yen, from ¥77.72 in late trading on Wednesday.

The Australian dollar  reached $1.0398, from $1.0343.

Marketwatch

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