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Dollar pulls back from 18-month highs as debt jitters ease

EURUSD rebounded to 1.1240 after dipping to 1.1160 earlier Monday, while the local versus German bond yield spread fell below 140 basis points.

Reported · Written up by our desk · Major Pairs

The US dollar retreated from 18-month highs after Monday afternoon as signs that debt markets were stabilizing reduced investor stress, Action Forex reported. Investors also reacted cautiously to snap elections in Spain amid a broader housing crisis backdrop.

In Europe, EURUSD rebounded to 1.1240 after slipping to 1.1160 at the start of trading on Monday, as the yield spread between local and German bonds fell below 140 basis points, according to Action Forex.

Despite the pullback, the dollar found support from strong demand for US assets, including higher Treasury yields and the Fed stepping up monetary policy tightening. Action Forex also pointed out that the ISM services gauge fell from 55.4 to 54.9, but readings above 50 still indicate ongoing expansion.

Oil and eurozone energy costs were another pressure point for the euro, with the eurozone described as a net importer of energy commodities. Action Forex cited a 65% rally in oil prices since the start of the year as a factor that worsened the region’s terms of trade, alongside reports that WTI has been falling for the fourth week in a row.

Latest closeWTI crude $89.70 ▼1.6%

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