The dollar rose against other major currencies on Wednesday after upbeat US economic data helped to send US Treasury yields higher, while the euro fell after credit rating agency Moody's said it may downgrade Spain's debt. Moody's put Spain's AA1 ratings on review for a possible downgrade, citing concerns about its mounting debt and 2011 funding needs, sending the euro down to test support just below $1.3300.
The euro shed 0.5 percent on the day to $1.3309 and headed down to 1.2808 Swiss francs, within range of a record low of 1.2765 francs set in September. Robert Ryan, FX strategist at BNP Paribas in Singapore, said the threat of a downgrade was not really a surprise given Spain's 10-year yield spread was about 250 basis points over Bunds.
Chartists said if the euro could hold above support in a band above $1.3280, it could retest $1.3500, its three-week high set on Tuesday. But if that support band gives way, the euro is likely to slip into a $1.3165-1.3500 range before eventually breaking down to test its November low at $1.2969. The dollar gained 0.4 percent against a basket of major currencies to 79.72, having climbed off a three-week low plumbed on Tuesday.
The dollar rose 0.2 percent to 83.85 yen, helped by talk of demand at the Tokyo fix but with resistance expected ahead of 84.50 yen, a level it has not seen since late September. Options barriers were expected up at that level, with defensive selling expected on the way up. Support was pegged around 82.50. The Aussie was trading at $0.9922 after gaining 1-1/2 cents this week to reclaim parity and reach a one-month high of $1.0030 on Tuesday. It rose to its highest in 28 years last month and traders did not rule out another push.
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