Dollar slips back, but European debt woes linger

AP News
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Posted: May 17, 2011 3:59 PM
Dollar slips back, but European debt woes linger

The dollar slipped lower against the euro Tuesday despite lingering concerns about Europe's debt woes, particularly the worry that more will have to be done to rescue the Greek economy.

The dollar lost ground as stocks pared their losses, even after a report showed weakness in the U.S. real estate market. The dollar, a traditional safe-haven currency, sometimes gains when the stock market falls, and slides when stocks are lower. Investors tend to cut their bets on riskier assets and buy the dollar when concerns about the weakness of global economy are weighing on traders' desire to take on risk. The Dow Jones industrial average was down about 75 points near the close of trading after earlier falling as much as 169 points.

On Tuesday, the government said that builders cut new home construction last month by 10.6 percent to a level that's less than half of what economists consider indicative of a healthy market. A separate report said U.S. factories made fewer goods in April, the first decline in 10 months, because of a shortage of auto parts from Japan.

In late trading in New York, the euro rose to $1.4229 from $1.4192. It had peaked near $1.49 in late April, its highest point since December 2009, before worries about Greece needing to reduce or delay bond repayments drove it lower. Of the 17 countries that use the euro, Greece, Ireland and Portugal have needed bailouts from their neighbors because of their high debt loads, and investors expect Greece will receive another round of help.

If Greece defaulted on its loans, that could have serious repercussions for the European banks that hold Greek bonds.

In other trading Tuesday, the dollar gained to 81.43 Japanese yen from 80.84 yen. The British pound climbed to $1.6251 from $1.6211. The dollar dropped to 0.8807 Swiss franc from 0.8832 Swiss franc and fell to 97.29 Canadian cents from 97.32 Canadian cents.