The euro slumped against the dollar today, dragged down by another sovereign downgrade for Ireland and giving added support to a US currency already buoyed by surging Treasury yields following Friday's US jobs data.
Ratings agency Standard & Poor's cut Ireland's sovereign credit rating today to AA, its second downgrade in three months and the catalyst for the euro's lurch lower to a near-two week low of $1.3806.
This added to the dollar's widespread strength already bolstered after smaller-than-expected job losses in the United States last Friday raised speculation the US Federal Reserve may lift interest rates early next year, triggering a sharp jump in two-year Treasury yields to a seven-month high.
“It is negative for the euro,” said Audrey Childe-Freeman, senior FX strategist at Brown Brothers Harriman, referring to the S&P downgrade.
“The euro was already looking vulnerable this morning (and) the news added to the negative sentiment. It is not a major shock but it is certainly going to weigh on the euro,” she said.
The euro fell as low as $1.3806, according to Reuters data but by 3.45pm was more or less unchanged at €1.3868.
The dollar index, a gauge of the greenback's value against a basket of six major currencies, was up 0.9 per cent on the day at 81.34, its highest since May 20th.
On Friday, the dollar index rose 1.6 per cent, its best performance since December 19th, Reuters data showed.
The dollar slipped 0.1 per cent against the yen to 98.54 yen, still close to a one-month high of 98.90 yen on trading platform EBS on Friday.
The dollar was buoyed before Ireland's downgrade as investors focused on improving prospects for the US economy, reversing a trend where the dollar had been sold for higher risk currencies in response to better economic fundamentals.
Reuters