Euro falls broadly in New York

The euro fell broadly on Thursday as dour European data and a jump in Italy's borrowing costs fanned fears of a spreading debt crisis in the eurozone. The euro's direction against the dollar could change overnight as investors mull the result of a vote on a US debt plan. A Republican deficit reduction plan headed to a close vote in the US Congress on Thursday and the White House urged divided lawmakers to clinch a compromise.
The euro is one of the few currencies not benefiting from the threat of America losing its triple-A rating as investors become increasingly doubtful last week's second bailout for Greece will keep the crisis from spreading to Italy and Spain.
"Additional signs that last week's (Greece) plan may not be implemented as expected will keep alive the risk of contagion to economies like Italy, which are in fact too big to bail out, and keep the euro pressured, even against the otherwise struggling dollar," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
While the debt ceiling debate haunts the dollar, US economic data managed to overshadow that concern. The number of Americans claiming new unemployment benefits dropped last week while pending sales of existing US homes unexpectedly rose in June.
The dollar, however, remains vulnerable as each day without a deal on raising the federal debt ceiling and cutting the deficit means an increasing risk of default or downgrade, Esiner said. In late afternoon New York trading, the euro was down 0.4 percent at $1.4308, with little support until around $1.41850 to $1.41870, the roughly 50 percent Fibonacci retracement of the $1.38376/$1.45370 rally this month.
The Swiss franc had risen to a record high against the dollar of 0.79900 franc on trading platform EBS, but the dollar gained and last traded at 0.80180, up 0.1 percent. For a second straight day, the dollar was up against a major currency basket, trading 0.2 percent higher at 74.232. Many investors are starting to price in the prospect of a downgrade.
"A downgrade, though likely, would not be meaningful. First of all, everybody knows that the US fiscal debt is a problem, so the ratings agencies won't be saying anything new," said Paul Markham, director and portfolio manager at Newton Capital Management Ltd in London. Newton has assets under management of $76 billion.
The dollar, meanwhile, slipped 0.2 percent to 77.780 yen on EBS, near a four-month low of 77.570 yen hit on Wednesday. That was also not far from a record low of 76.250 yen struck in March, which triggered co-ordinated intervention in the market to stem the yen's strength.