FX round-up: Euro continues decline

Currencies Round up

Date: Thursday 27 May 2010

The dollar rose against the euro on Wednesday, as investors remain concerned about the stability of the European banking system and the sovereign debt crisis.

Sentiment was also hurt by media reports that China is reviewing its holdings of European bonds.

Meanwhile a rise in bank borrowing costs (Libor), to their highest levels since July last year, on the back of fears about the European banking system, also took the single currency lower against major currencies but bigger losses were capped as European stock market punched through gains.

The euro came off the day’s low of under $1.22 but remained under pressure on fears the euro-zone sovereign-debt crisis would spread into the region's financial sector.

The dollar was boosted by data from the Commerce Department which showed new homes sales rose a bigger than expected 14.8% in April to a seasonally adjusted rate of 504,000, up from 439,000 the month before.

A separate report said durable-goods orders rose a better than forecast 2.9% in April.

The dollar index, which measures the US currency against a basket of six others, rose to 87.159 from 86.799 late Tuesday.

Sterling hit a two-week high against the euro, rising 1%, on concerns about debt problems in the euro zone. The pound fell 0.1% against the dollar to $1.4401.