The dollar rallied in early dealing versus the euro on Monday, and gradually extended its gains in mid-day trading, as Italy continued to a pay a heavy price to borrow.
Italian 10-year yields were down to 6.64 percent, but borrowing costs for 5-year notes rose to euro-area record highs, even as new Prime Minister Mario Monti is assembling a cabinet of technocrats in hopes of restoring market confidence. Spain’s borrowing costs also spiked higher.
On a day bereft of first-tier economic data from the U.S., the dollar rose near $1.3595 against the euro, up from near $1.38 overnight.
The buck also pushed ahead versus the sterling, improving to $1.5880, a gain of more than 2 cents from the previous session.
On the other hand, the dollar drifted slightly lower versus the yen, easing to a 2-week low of Y76.80. Japanese officials intervened to weaken the yen in late October, after the currency hit a record high of 75.55 versus the buck.
Japan’s gross domestic product was up an annualized 1.5 percent in the third quarter of 2011 compared to the previous three months, the Cabinet Office said on Monday in a preliminary report. That matched analyst expectations following the 0.5 percent contraction in the second quarter.
In economic news from Europe, industrial output in the euro area increased at the slowest annual pace in twenty-one months in September, as the major sub-sectors recorded weaker growth. The marked slowdown in activity adds to evidence that the region is sliding towards a recession.
The year-on-year growth in industrial production slowed markedly to 2.2 percent from 6 percent in August, data released by the statistical office Eurostat showed Monday.
Looking ahead on the U.S. economic calendar, the Commerce Department’s retail sales report for October, the results of the November manufacturing surveys of the New York and the Philadelphia Federal Reserves, the weekly jobless claims report and the Federal Reserve’s industrial production report are among closely tracked reports of the unfolding week.
A few other reports that can create a flutter in the market are the Labor Department’s producer and consumer price inflation reports for October, the National Association of Home Builders’ housing market index for November and the Commerce Department’s housing starts report for October.
