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Forex - Dollar regains ground as contagion fears punish euro

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Forexpros - The U.S. dollar regained ground against its major counterparts on Thursday, as the euro fell amid fears that a second Greek bailout package agreed last week would not be enough to prevent sovereign debt contagion in the euro zone.

During European afternoon trade, the greenback erased losses against the euro, with EUR/USD tumbling 0.77% to hit 1.4257.

The Italian Treasury auctioned approximately EUR7.97 billion of government debt earlier but the yield on 10-year bonds rose to 5.77%, up from 4.94% at the previous auction in June.

The greenback was also higher against the pound, with GBP/USD slipping 0.09% to hit 1.6316.

Earlier in the day, a report showed that British retail sales fell at their fastest pace in a year in July, while stores expected a further deterioration in August, as consumers cut back spending.

Elsewhere, the greenback was trading close to a four-month trough against the yen and a record low against the Swiss franc, with USD/JPY shedding 0.27% to hit 77.76 and USD/CHF inching up 0.06% to hit 0.8019.

Japan's Finance Minister Yoshihiko Noda repeated his warning against pushing the yen too high earlier Thursday, saying that he was continuing to watch markets closely.

Meanwhile, the greenback was slightly lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD shedding 0.16% to hit 0.9481, AUD/USD inching up 0.07% to hit 1.1028 and NZD/USD climbing 0.23% to hit 0.8719.

Earlier in the day, the Reserve Bank of New Zealand left its benchmark interest rate unchanged at 2.5% in a widely expected decision, but flagged an imminent rate increase.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.37%.

Later Thursday, the U.S. was to release government data on unemployment claims and pending home sales, while the House of Representatives was to vote on a proposed plan to raise the U.S. debt ceiling ahead of the August 2 deadline.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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