Greenback Gains as Oil Tumbles


NEW YORK ( TheStreet) -- The greenback was stronger against other major currencies as European sovereign debt concerns resurfaced and the Bank of England left rates unchanged, and amid disappointing China trade data and a retreat in oil prices.

Despite the sharp, anti-inflation rhetoric among eurozone officials that's been supportive of the euro in recent weeks, the currency on Thursday weakened after Moody's downgrade of Spain's government bond rating by one notch, to Aa2 from Aa1, with a negative outlook. Moody's said another downgrade was possible.

The euro was down 0.6% against the U.S. dollar at $1.3819. PowerShares DB US Dollar Index Bullish ( UUP) was rising 0.6% to $22.15 and PowerShares DB US Dollar Index Bearish ( UDN) was down 0.5% to $27.72.

The CurrencyShares Euro Trust ( FXE) was lower by 0.6% to $137.69.

The downgrade follows the rating agency's downgrade of Greece earlier this week, bringing the country's debt rating further into junk territory.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in a report that the euro has broken to the downside from its January high near the $1.386 level, and from there, the currency could test the $1.375 level as sovereign debt concerns continue to mount.

The U.K. pound sterling was also weaker, down 0.7% against the U.S. dollar at $1.6084 after the Bank of England left its key interest rate unchanged at a record low of 0.5%, as expected. Meanwhile, the Australian dollar was slipping 0.8% against the U.S. dollar at $1.0023 after China reported disappointing February trade data and employment in Australia during that month dipped unexpectedly for the first time in 18 months. CurrencyShares British Pound Sterling Trust ( FXB) was down 0.8% to $159.85.

"Although Lunar New Year celebrations are likely the cause of the unexpected deficit, investors were in no mood to take chances, and the USD strengthened against all its G10 peers," UBS foreign exchange strategist Chris Walker said in a report.

The greenback was 0.4% stronger against the Japanese yen at 83.0745 yen and 0.6% stronger against the Swiss franc at CHF 0.9348 as the trade data was released -- despite safe-haven bids for the latter two amid the turmoil in the Middle East and North Africa and the larger-than-expected increase in U.S. initial jobless claims.

Advances in the greenback were occurring as oil prices retreated on signs that China's economy was slowing.

Light sweet crude oil for April delivery fell $1.23 to $103.15 a barrel.

Oil plays were down Thursday morning. BP ( BP) was down 2.4% to $46.27, Chevron ( CVX) was falling 2.7% to $99.36 and Kinder Morgan ( KMI) was losing 1.7% to $30.23.

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-- Written by Andrea Tse in New York.

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