The dollar stayed near its highest since January on Wednesday, rebounding from early losses amid renewed concerns about Europe’s fragile banking sector.
A massive lending facility form the European Central Bank saw robust demand, indicating that the region’s major banks are in more trouble than some had feared.
The central bank for the 17 euro nations alloted EUR 489.191 billion ($640 billion) in three-year loans to banks in its long term refinancing operation. The funding operation drew more interest than expected, raising concerns about the health of the region’s banking system.
Economists say that banks may only use money to refinance their own debt or buffer their cash positions for next year.
The dollar rallied to $1.3030 versus the euro, up from near $1.32 overnight.
Early losses took the dollar to a 2-week low near $1.5760 versus the sterling, but the buck was able to steady near $1.57 later on.
Modest gains took the dollar to Y78 versus the yen, with the pair unable to sustain any direction for weeks.
Existing home sales in the U.S. rose for the second consecutive month in November, according to a report released by the National Association of Realtors on Wednesday, although the report also showed notable downward revisions to the sales data for recent years.
The report showed that existing home sales rose 4.0 percent to an annual rate of 4.42 million in November from a downwardly revised 4.25 million in October. Economists had been expecting existing home sales to rise 2.2 percent.
Consumer confidence in the Eurozone has continued to deteriorate in the month of December, according to a report released by the European Commission on Wednesday.
The report showed that the flash estimate of the consumer confidence indicator fell to -21.2 in December from -20.4 in November.
The Italian economy contracted in the third quarter mainly led by a fall in domestic demand and investment, and likely entered a recession triggered by the Eurozone’s deepening debt crisis, the latest official figures revealed Wednesday.
The seasonally and calendar adjusted gross domestic product declined 0.2 percent sequentially in the third quarter, in line with economists’ forecast. It was the first contraction in economic activity since the fourth quarter of 2009. In the second quarter, the economy expanded 0.3 percent quarter-on-quarter.
