Dollar battered on stop losses, euro rallies

LONDON (Reuters): The dollar fell broadly on Friday, extending losses as traders cited selling by hedge and model funds, while the euro rallied nearly 1 percent after a flurry of upside stop-loss orders in early trade.

The euro rose to $1.4278 after weak U.S. economic data overshadowed ongoing concerns about the euro zone debt crisis, although the single currency’s upside was capped by Asian sovereign offers near the day’s high.

The dollar hit a record low versus the Swiss franc after broad selling triggered by weak U.S. jobs and growth data on Thursday accelerated when the U.S. currency broke through a barrage of stops in a handful of currency pairs.

Some analysts said sluggishness in the dollar prompted investors to trim short positions taken in the euro earlier this week, when the single currency stumbled on signs that Europe remains deeply divided on how to help Greece tackle its debt problems.

Some investors remain optimistic that European nations will ultimately reach an agreement on dealing with Greece despite suggestions Athens may not receive the next tranche of IMF aid.

Analysts said the dollar’s hammering on Friday, which ends a week of choppy trade, suggested investors are unwilling to take on big positions in either the dollar or the euro, given ongoing uncertainties about the euro zone debt crisis and Washington’s own fiscal problems as the U.S. economy stays weak.

“The market is finding it fairly difficult to hold onto positions, if we’re back in the ugly competitions between the euro and the dollar, both have fairly big negatives,” said Jeremy Stretch, currency strategist at CIBC.

“They’re struggling to outweigh each other on a durable basis.”

In early European trade, the euro traded 0.8 percent higher on the day at $1.4255. Market participants said a failure to push up to $1.43 during Friday’s session could see its gains fade, while technical resistance was also seen above that level.

“If the rally extends beyond $1.4280, there should be some resistance around $1.4335 -- the 38.2 percent Fibonacci retracement of the market’s May decline,” analysts at Citi said in a note.

Before that, the euro’s 55-day moving average at $1.4323 may provide an obstacle to further upside for the single currency.

In addition to technical drivers, the euro was expected to remain vulnerable to comments from European officials about how Greece will continue to receive funding to pay its mountain of debt.

Despite the euro’s gains, investors were unable to get too excited about the single currency, which was evident by its fall to a record low of 1.2168 Swiss francs according to electronic trading platform EBS. Due to its safe-haven status, the franc often gains during times of uncertainty.

The dollar hit a record low against the Swiss franc of 0.8534 francs on EBS, and was last down 1 percent at 0.8575.

The dollar retreated after data on Thursday showed fresh signs of a slowdown in the U.S. labor market and the second estimate of first quarter U.S. growth came in below forecasts.

That helped push the 10-year Treasury yield to a six-month low, adding to negative dollar sentiment as U.S. yields fell further below those of other currencies.

The New Zealand dollar marked a three-year high of $0.8200, coming within a whisker of a 26-year peak of $0.8215 hit in March 2008. It was last up 1.1 percent at $0.8163.