Euro climbs despite possible Portugal bailout

AP News
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Posted: Mar 24, 2011 3:23 PM
Euro climbs despite possible Portugal bailout

The euro gained against the dollar Thursday even though many believe that a bailout of Portugal is imminent.

Greece and Ireland received bailouts last year. EU officials are meeting in Brussels Thursday and Friday in an effort to cement an expanded bailout fund for the region and give final approval to new economic rules.

The euro, used by 17 European countries, has also climbed about 5 percent this year on expectations that the European Central Bank will lift interest rates as soon as April. Higher interest rates can boost demand for a nation's currency, boosting its value.

In late afternoon trading Thursday, the euro climbed to $1.4183 from $1.4123 late Wednesday. Yet a bailout typically has the opposite effect.

"The resilience of the euro in the face of seemingly incontrovertible evidence that Portugal will need to get assistance and that very same program and approach has not been enough to stabilize the Greek and Irish situation is amazing," said Marc Chandler, a currency analyst at Brown Brothers Harriman in New York. He said that increasing certainty that Spain, a much larger economy than Portugal, Greece or Ireland, will not need a bailout and the expectation that the ECB will soon increase its key rate have helped bolster the euro even as the bloc's poorer countries struggle.

Portugal's minority government fell Wednesday after its Parliament voted down planned austerity measures that would have helped it cut down debt. The country's borrowing costs rose to a euro-era record Thursday, as did Ireland's borrowing costs.

The dollar traded in different directions against other currencies Thursday after the release of mixed economic data in the U.S. A government report on people filing for unemployment benefits added to evidence that layoffs were slowing and hiring may be on the rise, but a separate report showed that businesses cut their orders for manufactured goods last month. Analysts warned that the disruption to supply chains resulting from the earthquake, tsunami and nuclear crisis in Japan might affect manufacturing in the U.S. over the next few months.

The British pound dropped to $1.6111 from $1.6246, while the dollar edged up to 80.95 Japanese yen from 80.86 yen. The U.S. currency fell to 97.65 Canadian cents from 98.06 Canadian cents and slipped to 0.9073 Swiss franc from 0.9081 Swiss franc.

The dollar was also lower against other currencies from around the world.