Euro got another boost again today after a strong Spanish government-debt auction helped to sustain market sentiment that was improved by yesterday’s coordinated central-bank action to cut dollar-funding costs and increase liquidity in the financial system. With the bond auction being the main driver of the euro today, the weak euro zone manufacturing PMI released today played a side role. What will be key to the euro’s direction will be whether European leaders are able to agree on credible action to tackle the debt crisis at a European Union summit on December 9. EURUSD rose to 1.3504 after the auction from a session low of 1.3416 and closed the session at 1.3479.
The dollar slid against all its 16 major counterparts as investors sought higher-yielding assets due to the upbeat mood. The dollar index traded at 78.250, down from 78.345 in North American trade late Wednesday. Dollar was shaky after U.S. jobless claims rose to 402,000 in the week ended November 26, higher than consensus forecast of 390,000.
Sterling was up 0.7 percent following the Spanish bond auction, hitting a session high of 1.5744 from 1.5634. The pound had earlier fallen due to weak UK manufacturing PMI but soon bounced since cable is mainly trailing the euro and is benefitting from the increase in risk appetite. It is supported by a broadly weaker dollar especially after Wednesday’s coordinated central bank action to increase liquidity
USDJPY has risen to 77.79 since the big drop in Wednesday’s European session following the central bank announcement on dollar funding cuts which plunged dollar to 77.28 yen. Japanese investors took advantage of the overnight move down to buy at the lower price. Meanwhile, a broadly stronger euro today gained 0.8 percent against the yen to peak at 105.05 from 104.19. Finance Minister Jun Azumi said today that there is no change in Japan’s policy to take firm measures against excessive and disorderly currency moves driven by speculators.
The Canadian dollar ended five days of gains against its U.S. counterpart and remains range bound since the big drop in USDCAD yesterday, trading between 1.0163-1.0221. Canada’s major export, crude oil turned lower versus yesterday, which also weighed on the commodity-linked loonie.