Dollar Slumps Against Euro to Two-Week-Low

By Josie Cox 

        The U.S. dollar slumped to a more than two-week low against the euro Friday, pressured by some weak U.S. housing markets numbers out Thursday, and fears that more downbeat data later in this session could knock investors' confidence in a U.S. interest rate rise later this year.
        In early European trade, the euro rose to just under $1.09, its highest level against the buck since early April, while the British pound hit a level against the dollar last seen in early March.
        U.S. new-home sales in March and a preliminary reading of April's factory activity missed economists' expectations on Thursday. On Friday, figures on U.S. durable goods orders are due to be published, which Credit Suisse strategists say could "weigh on expectations of Fed tightening, causing the dollar to consolidate further."
        The dollar has had a stellar run over the last months, fueled by expectations that the Fed will raise rates while other central banks around the world are still aggressively easing. It has added more than 11% against the euro, but a string of recent downbeat economic figures has sparked some concerns that the dollar trade may be becoming overcrowded.
        Elsewhere Friday, European shares climbed, but gains were limited as fears over the future of Greece continued to linger.
        In early trade, and having ended the previous session lower on downbeat economic data, the Stoxx Europe 600 rose 0.2%, mirroring similar advances across country indexes in France, Germany and the U.K.
        On Friday, Greece once again dominates the agenda as European Union leaders are due to meet in Brussels, but the chance of the talks yielding any major progress appears slim.
        On Thursday, German Chancellor Angela Merkel met with Greek Prime Minister Alexis Tsipras ahead of the summit of European Union leaders in Brussels on Friday. "We had a constructive dialogue," Ms. Merkel said after the meeting, adding that she wants to keep the "confidentiality" of the talks.
        Asked about the perspective of Greece soon running out of money, Ms. Merkel said: "We have to do everything to avoid that."
        "By now it has become clear that we should not expect too much in terms of meaningful steps toward Greece resolving its problems," said ING strategist Job Veenendaal. Citigroup wrote in a note that Greece is "running out of money, ideas, time and patience". The current negotiations, they added, "are stuck and the risks of a failure of these negotiations have risen further".
        They said that "the bar to an agreement is gradually being raised" and that it is now "plausible that capital controls will be imposed in Greece or a government default takes place before an agreement is struck or that no agreement will be reached."
        Greek stock markets have had another turbulent week and the country's main stock index, the Athex Composite, is now close to 11% lower so far this year. Over the last 12 months it has depreciated around 40%, making it one of the world's worst performing indexes.
        Yields on Greek government bonds, which rise as the price of bonds fall, have remained pinned close to multiyear highs this week.
        On Friday, the yield on the two-year bonds was at 23.5%, while the yield on the 10-year was at 12.1%.
        A so-called inverted curve, where longer-dated bonds yield less than those that are due for repayment sooner, indicated that investors are factoring in a severely heightened probability of default despite the easing of tensions.
        Yields on German government bonds, meanwhile--commonly valued as a low-risk asset during times of stress--remained pinned a handful of basis points off all-time lows. The 10-year government bond was yielding just 0.16% on Friday. The 30-year bond was around 0.58%.
        Write to Josie Cox at josie.cox@wsj.com
        (END) Dow Jones Newswires

        April 24, 2015 05:58 ET (09:58 GMT)

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