The euro on Thursday suffered its worst day against the dollar in a month after a cut to Spain's credit rating kept eurozone debt problems in focus and left it vulnerable to more losses in coming weeks. Unrest in Saudi Arabia, where witnesses said shots were fired as authorities dispersed protesters, also dulled risk appetite, drove oil prices up, and cut dollar gains against the Swiss franc.
The euro fell 0.9 percent to $1.3788, its biggest daily slide since February 10. It hit a four-month peak of $1.4036 days ago after European Central Bank President Jean-Claude Trichet hinted at an interest rate rise as soon as April. Traders chalked up most of its losses to Moody's downgrade of Spain's credit rating, though sovereign demand may have buffered it from even bigger intraday losses.
"The sovereign debt crisis has always been there but traders put it at the back their minds," said Gareth Sylvester, senior currency strategist at San Francisco-based Klarity FX. "With the re-emergence of concerns on sovereign debt, why expose yourself unnecessarily?" Technical analysts saw trendline support for the euro around $1.3775, drawn from lows in January and February, but a fall below that would open the door to more losses.
London-based UBS FX analyst Geoffrey Yu said the Spanish downgrade showed the eurozone's debt crisis is far from over. He said risks also stem from Europe's inability so far to agree on a framework for a debt rescue fund. Against the yen, the dollar was up 0.3 percent to 82.93 yen after climbing to its highest since February 22. The dollar retreated from a session peak against the Swiss franc after witnesses said shots were fired as Saudi authorities broke up a protest and was last up 0.3 percent at 0.9320 francs.
The Australian dollar fell after data showed China swung to a surprise trade deficit in February of $7.3 billion, its largest in seven years. The numbers stirred worries that China's growth could slow and affect countries such as Australia, which has benefited from China's expansion. The Aussie dollar was down 1 percent at $0.9996. Sterling traded 1 percent lower at $1.6049 after the Bank of England held interest rates at a record low of 0.5 percent, as widely expected.