The forex market was volatile as headlines changed often during the last two days. Weak manufacturing numbers from the eurozone hurt investors’ sentiment. Thursday, market players remained short of euros on worries over an economic slowdown and high levels of sovereign debt in many euro zone countries. But on Friday overall, worries about faltering global growth in the euro zone and China eased a day after hitting stocks and riskier currencies, tempering demand for safer bets such as the greenback and the yen.
The euro gained against the dollar on Friday after the Census Bureau reported that new home sales came in weaker than expected in February, stoking fears that the U.S. housing sector still faces hurdles. The Census Bureau said that new home sales fell to a seasonally adjusted annual rate of 313K, from 318K in the preceding month whose figure was revised down from 321K. Analysts had expected new single-family home sales to rise to 325K. In the U.S., unemployment rates are falling and sectors such as manufacturing have shown signs of improvement, but housing continues to drag on recovery.
Meanwhile, government auctions have gone smoothly and largely worry free in Europe, which is sparking demand for the European currency. Euro zone finance ministers are moving closer to agreeing a combined rescue fund of around €700 billion in Copenhagen next week. The recent euro rally has been helped by the possibility that the Federal Reserve could launch a third round of quantitative easing. In addition, currency speculators pared their net bets on the dollar in the latest week to the lowest since February, according to data from the Commodity Futures Trading Commission released on Friday.
Investors held a net $13.7 billion in bets that the euro will fall against the dollar, according to the Commodity Futures Trading Commission’s weekly report on the commitments of traders. That represented a net 82,954 contracts, down 16% from the prior week. In the yen, speculators wagered a net $3.9 billion that it will decline against the dollar. That position, a net 25,821 contracts, was worth 40% less than the prior week. Traders held a net $1.5 billion gambling that the Swiss franc will fall against the dollar, or 11,191 contracts, 23% lower than the previous week.