The dollar has weakened against its major European competitors on Tuesday, after investors turned optimistic. Investors are hoping for action from policy makers to contain the debt crisis in Europe. A successful debt auction by Spain and reports that China is planning new economic stimulus for the second half of the year also contributed to the positive mood. The increase in investor risk appetite contributed to the weakness in the dollar.
The People's Bank of China injected CNY 220 billion into the money market through reverse repurchase operations on Tuesday, reports said. The central bank said it added CNY 150 billion using seven-day reverse repos at a yield of 3.4 percent and CNY 70 billion via 14-day reverse repos at 3.6 percent.
Spain saw a steep decline in borrowing costs at an auction on Tuesday amid speculation that the European Central Bank would resume its purchase of peripheral bonds. Further, markets are also hopeful that a series of bilateral meetings between key Eurozone leaders may produce a lasting solution to the region's prolonged sovereign debt crisis.
The Spanish Treasury managed to sell slightly more debt than it had planned in Tuesday's auction. The agency raised a total EUR 4.51 billion from the sale of 12 and 18 - month bills against a target of EUR 3.5 billion - EUR 4.5 billion.
The yield on the one-year debt declined to 3.070 percent from 3.918 percent in the previous sale on July 17. The 18-month paper was placed to yield 3.335 percent, which was less than the 4.242 percent fetched in July.
The dollar has been steadily falling against the Euro on Tuesday, declining from Monday's high of $1.2294 to around $1.2480, its lowest level since the fourth of July.
Germany's leading index declined for the third consecutive month in June, data from a survey by the Conference Board showed Tuesday. The leading economic index decreased by 0.8 percent on a monthly basis to 103.2 in June, marking the third consecutive decline.
The greenback has also pulled back sharply against the pound sterling Tuesday, falling to a 3-month low of $1.5804, from Monday's high of $1.5677.
The U.K. public sector net borrowing, excluding the temporary effects of financial interventions, increased in July, data from the Office for National Statistics showed Tuesday. Net borrowing was GBP 0.6 billion in July, which was GBP 3.4 billion higher than in July last year when PSNB was -GBP 2.8 billion.
Bank of Japan Deputy Governor Kiyohiko Nishimura said on Tuesday that China is now entering the "danger zone", citing a combination of demographic change, a property price bubble, and a steep loan growth, which increases the risk of financial crisis in a country.
Speaking at the Reserve Bank of Australia-BIS Research Conference in Sydney, Nishimura said not every bubble-bust leads to a financial crisis and not every country experiencing demographic changes has a malign property bubble.
The buck has held basically flat in comparison to the Japanese Yen Tuesday, hovering around Y79.350.
Japan's all industry activity grew 0.2 percent in June from a month ago, offsetting the 0.2 percent drop in May, data from the Ministry of Economy, Trade and Industry showed Tuesday. The increase for June matched economists' expectations.
by RTT Staff Writer
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