Hopes of further recovery in the U.S. economy also lifted the greenback against its rivals, with a widely watched dollar index hitting a 12-month peak. Strong U.S. economic data have reinforced expectations that the Federal Reserve will be able to raise interest rates faster than its counterparts in the European Union and Japan. The U.S. dollar was "winning against everything except the yen," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich. The greenback was unchanged against the yen, also a traditional haven currency.
The greenback struck a five-week high against the U.K. pound, on fears that Thursday's general election won't have an outright winner. Investors worry that a hung parliament would be unable to reverse the country's growing deficit, imperiling the U.K.'s sovereign credit rating. The euro was at $1.3043 down from $1.3191 late Monday, according to EBS via CQG. Earlier in New York, it had fallen to 1.3021, it's lowest point since May 2009. Analysts said a plunge below $1.30 would open the door for more extensive losses, perhaps down to $1.25.
The dollar was at Y94.58, from Y94.59, while the euro was at Y123.26 from Y124.80. The dollar was at CHF1.0993, up from CHF1.0861. Sterling dipped to $1.5091 before recovering some losses to trade at $1.5122 around midday Tuesday, from $1.5249 late Monday. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 83.141, down slightly from an earlier 12-month peak at 83.263 but up from 82.370.
"People are becoming well aware of the fact that the solvency issue for Greece hasn't been resolved with the aid package," said Adarsh Sinha, foreign exchange analyst at Barclays Capital in London. "They still have to repay the money. They still have to repay the interest." There are also renewed doubts about the Greek government's ability to carry out harsh austerity measures required by the bailout package from the European Union and the International Monetary Fund.
In Athens Tuesday, Greek civil servants and teachers walked off the job, launching a 48-hour strike to protest the measures. The walkout comes one day before a planned nationwide general strike that is expected to paralyze the country. "Even the tax collectors are going on strike, which will presumably make it even harder to collect those higher taxes," said Jacob Oubina, currency strategist at Forex.com in Bedminster, N.J.
The euro's sharp decline Tuesday comes after London markets reopened following a holiday Monday. Tokyo markets remain closed through Wednesday for Golden Week. In other currencies, the Australian dollar was one of the worst performers on the day, slipping nearly 1.6% against the dollar despite the central bank's decision to hike interest rates there by 25 basis points. The currency was at $0.9115, from $0.9263 late Monday. The Canadian dollar was also pushed lower by risk aversion and softening oil prices, with the greenback ticking up more than one full cent to C$1.0223 from C$1.0111 late Monday.
Beijing's decision over the weekend to further raise reserve requirements for banks to help cool China's robust property market has hurt the currencies of commodity-based economies like Australia and Canada, analysts said. A slowdown in Chinese growth is likely to reduce demand for the products these countries export.
Although investors focused on ramifications of the euro-zone debt crisis, U.S. data lent some support to the greenback. New orders for manufactured goods jumped 1.3% in March to $391.5 billion, the Commerce Department said Tuesday. Wall Street had been expecting orders to slide by 0.1%. U.S. pending home sales rose slightly more than expected in March, by 5.3%, rather than the 5.0% predicted
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