Dollar Back Above 80 Yen, Fitch Cuts Greece

10:45, 22nd February 2012

(RTTNews) - The dollar rallied on Wednesday, hitting its highest level since last summer versus the yen while rebounding versus the sterling.

There was little movement versus the euro, despite a downgrade of Greece by Fitch Ratings just days after Athens secured a crucial second bailout.

Even with a dangerous sovereign debt crisis on the back-burner for the time being, Europe faces a hard path to sustained economic growth.

Discouraging economic news from Germany has traders starting to expect the euro zone economy will be in recession in the first half of 2012.

The dollar was steady at $1.32 versus the euro, after touching a 15-day low near $1.3280 earlier in the week.

Euro zone private sector activity unexpectedly slipped back to contraction in February, fueling concerns that the economy may be sliding into a recession amid the region's prolonged debt crisis.

The composite output index fell to 49.7 in February from 50.4 in January. Economists expected the index to remain almost steady at 50.5.

"A retreat back below the 50.0 no-change level for the Euro zone PMI is a disappointment, and highlights the ongoing risk that the region may be sliding back into recession, said Chris Williamson, chief economist at Markit.

Fitch Ratings cut Greece's sovereign credit rating to C from CCC and said a planned debt swap would constitute a "restricted default."

Meanwhile, the dollar jumped to $1.5685 versus the sterling, up from near $1.58.

The Bank of England's recent decision to lift the asset purchase programme by GBP 50 billion in February was split, as two members called for larger stimulus, the minutes of the meeting showed Wednesday.

The buck extended its strong February gains versus the yen, rising above Y80 for the first time since July.

The National Association of Realtors is scheduled to release its report on U.S. existing home sales for January at 10 am ET. Economists estimate existing home sales of 4.69 million for the month, a modest increase from the 4.61 million units reported for the previous month.

Back to Forex News