The dollar stormed back from early losses versus the euro on Friday, after ratings agency Fitch raised red flags about Italy’s ability get its fiscal affairs in order.
Hours after Moody’s downgraded numerous banks in the U.K. and Portugal, Fitch downgraded Italy’s sovereign credit rating and says the outlook on its long-term ratings is negative.
The euro withstood the bank downgrades, but came under heavy pressure amid worries that Italian leaders will not be agile enough to deal with the fallout from a potential Greek default.
The dollar bounced back to $1.3385 after sliding near $1.3525. Even with the afternoon rally, the dollar remains well off Monday’s 8-month high of $1.3144.
The buck steadied near $1.5550 versus the sterling, edging back toward a yearly high of $1.5270.
After suffering big early losses versus its Canadian counterpart the dollar stabilized near C$1.04.
Earlier in the day, official data showed the U.S. economy added more jobs than expected in the month of September, although the unemployment rate remained unchanged.
Total non-farm payroll employment increased by 103,000 jobs in September, as the addition of 137,000 private sector jobs more than offset the loss of 34,000 government jobs. 65,000 new jobs were predicted by economists.
In economic news from the euro zone, German industrial production declined at a slower-than-expected pace in August, after rebounding in July, data from the Federal Ministry of Economy and Technology showed Friday.
After adjusting to seasonal and calendar variations, production fell 1 percent month-on-month, compared to expectations for a 2 percent fall. In July, production grew 3.9 percent, which was revised from the initially reported 4 percent growth.
The Bank of Japan on Friday retained its key interest rate near zero while sticking to the monetary easing measures announced in August. At the same time the central bank sent a strong warning on the risks from lingering debt troubles in Europe.
The dollar remained in a coma near Y76.50 versus the yen.