NEW YORK (Dow Jones)--The dollar declined to session lows versus all the major currencies Friday after Moody's Investors Service issued a downgrade warning to California.
Moody's said California's A2 general obligation rating, as well as the ratings for lease debt and other state-backed debt, are on Watchlist for possible downgrade.
Concerns on California stem from an expected budget gap and announcements by the state controller that without solutions the state won't be able to meet all its financial obligations in July.
"The state set no limits on spending, and we're heading that way across the U.S. as well, raising concerns [on the dollar]," said Jacob Oubina, a currency strategist at Forex.com.
The dollar, therefore, was sold off in a knee-jerk reaction.
The timing of the dollar's move also coincided with the closing of positions ahead of the end of London trade. In addition, several options expire Friday across markets in equities and commodities.
As a result, "it can get pretty nasty," said Oubina.
The fixing time, or a key reference point for rates, around 11:30 a.m. EDT, is increasingly the moment at which businesses choose to execute their deals.
"That's why you get such a big run up in currencies at that time, without even that much volume," said John McCarthy, manager of currency trading at ING Capital Markets in New York.
He added that there were trading stops just above the $1.40 level for the euro, $1.65 for the pound and $0.8100 for the Australian dollar.
"That's all we do now ... just stopping people out of the bottom and top all the time. It's partly because the equity markets aren't telling us anything," given recent choppiness, said McCarthy.
The euro hit its highest level since Monday, $1.4013, while the dollar fell as low as Y96.02. The U.K. pound advanced to a one-week high of $1.6562. The dollar fell to CHF1.0765. The Australian dollar gained to $0.8117.
However, since the close of European markets, the dollar has come off its lowest levels and the euro retreated with a decline in U.S. stocks.
The euro recently hit an intraday low against the yen at Y134.11.
Friday afternoon in New York, the euro was at $1.3961 from $1.3894 late Thursday, while the dollar was at Y96.06 from Y96.62, according to EBS. The euro was at Y134.12 from Y134.22. The pound was at $1.6485 from $1.6341, while the dollar was at CHF1.0800 from CHF1.0868.
Trading has been volatile and largely range bound all week, indicative of the market's uncertainty ahead of next week's Federal Open Market Committee meeting.
Analysts say traders are looking for a new trading catalyst, now that it appears the global recession is ending, but growth is far off. Possible contenders next week besides the FOMC include U.S. housing data; a U.S. Treasury auctioning for $104 billion in two-, five-, and seven-year notes; and a one-year, longer-term refinancing operation by the European Central Bank.
Moody's said California's A2 general obligation rating, as well as the ratings for lease debt and other state-backed debt, are on Watchlist for possible downgrade.
Concerns on California stem from an expected budget gap and announcements by the state controller that without solutions the state won't be able to meet all its financial obligations in July.
"The state set no limits on spending, and we're heading that way across the U.S. as well, raising concerns [on the dollar]," said Jacob Oubina, a currency strategist at Forex.com.
The dollar, therefore, was sold off in a knee-jerk reaction.
The timing of the dollar's move also coincided with the closing of positions ahead of the end of London trade. In addition, several options expire Friday across markets in equities and commodities.
As a result, "it can get pretty nasty," said Oubina.
The fixing time, or a key reference point for rates, around 11:30 a.m. EDT, is increasingly the moment at which businesses choose to execute their deals.
"That's why you get such a big run up in currencies at that time, without even that much volume," said John McCarthy, manager of currency trading at ING Capital Markets in New York.
He added that there were trading stops just above the $1.40 level for the euro, $1.65 for the pound and $0.8100 for the Australian dollar.
"That's all we do now ... just stopping people out of the bottom and top all the time. It's partly because the equity markets aren't telling us anything," given recent choppiness, said McCarthy.
The euro hit its highest level since Monday, $1.4013, while the dollar fell as low as Y96.02. The U.K. pound advanced to a one-week high of $1.6562. The dollar fell to CHF1.0765. The Australian dollar gained to $0.8117.
However, since the close of European markets, the dollar has come off its lowest levels and the euro retreated with a decline in U.S. stocks.
The euro recently hit an intraday low against the yen at Y134.11.
Friday afternoon in New York, the euro was at $1.3961 from $1.3894 late Thursday, while the dollar was at Y96.06 from Y96.62, according to EBS. The euro was at Y134.12 from Y134.22. The pound was at $1.6485 from $1.6341, while the dollar was at CHF1.0800 from CHF1.0868.
Trading has been volatile and largely range bound all week, indicative of the market's uncertainty ahead of next week's Federal Open Market Committee meeting.
Analysts say traders are looking for a new trading catalyst, now that it appears the global recession is ending, but growth is far off. Possible contenders next week besides the FOMC include U.S. housing data; a U.S. Treasury auctioning for $104 billion in two-, five-, and seven-year notes; and a one-year, longer-term refinancing operation by the European Central Bank.
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