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Forex - Dollar falls on consumer sentiment data, Spanish bailout talk

Published 10/12/2012, 03:30 PM
Updated 10/12/2012, 03:30 PM

Investing.com - The dollar weakened against most major currencies on Friday in a risk-on trading session stemming from hopes that Spain is moving closer to requesting a bailout.

Consumer sentiment figures out of the U.S. came in stronger than expected, which prompted investors to ditch the safe-haven greenback and take on risk.

In U.S. trading on Friday, EUR/USD was up 0.25% at 1.2960.

Market talk suggesting that Spain may be closer to requesting a bailout sparked a global risk-on trading session that saw investors chasing higher-yielding currencies.

Earlier this week, Standard & Poor's said it lowered Spain's long-term credit rating to 'BBB-' from 'BBB+' and cut its short-term credit rating to 'A-3' from 'A-2'.

The ratings agency said Spain's deepening economic recession is limiting the Spanish government's policy options and added that rising unemployment and spending constraints are likely to fuel social discontent and contribute to friction between Spain's central and regional governments.

"In our view, the capacity of Spain's political institutions (both domestic and multilateral) to deal with the severe challenges posed by the current economic and financial crisis is declining," Standard & Poor's said in a statement.

A bailout would allow the European Central Bank to step in and buy Spanish sovereign debt in the secondary market, which would lower borrowing costs in the crisis-weary country.

Elsewhere, industrial production in the eurozone rose unexpectedly in August, rising 0.6% after an increase of 0.6% the previous month.

Analysts had expected industrial production to contract by 0.4% in August.

Meanwhile in the U.S., the  University of Michigan/Reuters consumer sentiment index for October rose unexpectedly.

In a report, the University of Michigan said that consumer sentiment rose to a seasonally adjusted 83.1 from 78.3 in September.

Analysts had expected consumer sentiment to fall to 78.0.

Also in the U.S., producer price inflation rose more than expected in September, official data showed on Friday.

In a report, the Department of Labor said that it producer price index rose a seasonally adjusted 1.1% from 1.7% in August.

Analysts had expected the figure to rise 0.7% last month.

The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.20% at 1.6078.

The dollar was up against the yen, with USD/JPY trading up 0.09% at 78.41 and down against the Swiss franc, with USD/CHF trading down 0.25% at 0.9331.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD trading up 0.10% at 0.9796, AUD/USD down 0.32% at 1.0231 and NZD/USD trading up 0.03% at 0.8176.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.17% at 79.74.







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