Dollar Strengthens As Greek PM Fuels Risk Aversion
The dollar rallied for a second session versus the euro on Tuesday, after Greek Prime Minister George Papandreou unexpectedly called for a public referendum on his nation’s acceptance of bailout funds from its neighbors and the IMF.
Reports from Athens suggested that Papandreou now faces an open revolt from his own party, leading to further doubts that an expanded bailout fund can prevent a wider crisis from sweeping through Europe.
Developments in Europe once again overshadowed the release of U.S. economic figures, including a relatively downbeat assessment of the nation’s manufacturing sector.
The dollar rose nearly $1.36 before leveling off at $1.37. With the advance, the dollar moved further await from a recent 7-week low of $1.4246.
The buck improved to $1.59 versus the sterling, taking back some of its recent losses.
There was virtually no movement versus the yen, with the buck holding at Y78.30. Earlier this week the Bank of Japan intervened to weaken the yen after it hit a record high of Y75.55.
Activity in the U.S. manufacturing sector unexpectedly expanded at a slower rate in the month of October, according to a report released by the Institute for Supply Management on Tuesday, with the index of activity in the sector pulling back toward the key 50 level.
The ISM said its manufacturing index dropped to 50.8 in October from 51.6 in September, with a reading above 50 indicating growth in the sector. The drop surprised economists, who had expected the index to edge up to 52.0.
The Federal Reserve makes its latest interest rate decision on Wednesday, following a two-day meeting that kicked off this morning. Economists expect no change to the fed funds rate.
The U.K. economy expanded at a faster than expected pace in the third quarter, underpinned by an improvement in services and a recovery in production that offset a decline in construction.
Gross domestic product increased 0.5 percent quarter-on-quarter, much faster than the 0.1 percent growth logged in the previous quarter, preliminary estimates from the Office for National Statistics revealed Tuesday.
