NEW YORK (TheStreet) -- The U.S. dollar is taking back territory from other major currencies Friday morning with the support of encouraging corporate and economic news, caution about its European counterpart and stabilizing oil prices.
The dollar was up 0.5% against the Swiss franc at CHF 0.9308. The euro was slipping 0.4% to $1.3741 and the UK pound was down 0.5% to $1.6049 as a bigger than expected contraction of 0.6% in the British economy during the last three months of 2010 cast a shadow on expectations of interest rate increases by the Bank of England.
"According to the Fed's U.S. dollar major currency trade-weighted index, the buck falls about -2.2% for every +10% rise in the price of oil," noted OANDA Chief Currency Strategist Dean Popplewell in a report.
On Friday morning though, light sweet crude oil prices for April delivery, which had shot up to $100 a barrel for the first time since Feb. 23, 2008, were flat at $97.22 a barrel.
Oil prices were stabilizing as markets turned their attention to key economic reports and Saudi Arabia reportedly hiked its oil production to help replace production lost to Libya's turbulence. Saudi Arabia has quietly increased its oil output by more than 700,000 barrels a day to more than 9 million barrels a day, according to
, which cited an unidentified industry source.
A spate of positive U.S. corporate and economic news was reported as the stabilization occurred.
On Friday, The Thomson Reuters/University of Michigan final index of consumer sentiment reported that U.S. consumer sentiment hit its highest level in three years in February. The reading came in at 77.5, up from 74.2 in January, above the average forecast of 75.3, according to a
poll of economists.
In corporate news,
unexpectedly won a $35 billion contract to build aerial refueling tankers for the Air Force late Thursday, while
American International Group
said it swung to a profit in the fourth-quarter late Thursday. Also,
hiked its full-year sales outlook after exceeding Wall Street's expectations and
blew past analysts' fourth-quarter estimates on strong demand for its UGG brand boots.
Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, said he thinks the greenback is poised to end the week firmer against European currencies, where there was a "bout of month-end profit taking."
"The recent hawkish comments from European Central Bank officials have prompted euro buying on dips this week as investors assess the outlook for central bank policy and seek long positions in the banks most likely to act first. And yet failure to break the $1.385 level leaves the euro susceptible to near-term weakness ahead of the Irish elections today," Chandler said in a report. Ireland's general elections take place on Friday, and the markets will be watching closely for the impact of the results on Europe's debt contagion crisis.
In a report, UBS Head of Foreign Exchange Strategy Mansoor Mohi-uddin said investors should cautiously observe any rebound in the U.S. dollar.
"Investors should be wary of a rebound in the dollar if equity markets start to worry that global growth may falter," noted Mohi-uddin, pointing to the risks related to the potential for more oil price spikes and the Middle East and North Africa turmoil.
"That would cause U.S. fund managers to repatriate funds as they did in 2008."
PowerShares DB US Dollar Index Bearish
was down 0.4% to $27.63, while the
PowerShares DB US Dollar Index Bullish
was rising 0.3% to $22.21.
CurrencyShares Euro Trust
was lower by 0.4% to $136.90 and the
CurrencyShares Swiss Franc Trust
was falling 0.5% to $106.45.
iPath GBP/USD Exchange Rate ETN
was flat at $43.42.
-- Written by Andrea Tse in New York.
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