Dollar rises against euro on Greek aid worries

AP News
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Posted: Jun 06, 2011 4:11 PM
Dollar rises against euro on Greek aid worries

The dollar edged higher against the euro after a German official raised doubt that Greece would get additional aid.

In afternoon trading Monday in New York, the euro fell to $1.4587 from $1.4624 Friday.

Earlier in the day the euro hit its highest level in a month at $1.4657. But the euro quickly retreated after a German finance ministry spokesperson said that another bailout for Greece wasn't certain, unnerving investors, according to UBS currency strategist Chris Walker.

Investors worry that Greece needs millions more to cover a funding gap next year and prevent the country from defaulting on its debts, even after last year's 110 billion euro package of rescue loans from the International Monetary Fund and other countries that use the euro.

European officials are working on a second possible emergency aid package, estimated at 100 million euros. EU officials want more austerity measures from Greece. The Greek government has agreed to cut spending even further, but Greek citizens are protesting the government's moves.

Also influencing currency trading Monday was Thursday's European Central Bank meeting. Traders will be closely watching for any signal of an expected interest-rate hike in July, said Joseph Trevisani, chief market analyst at FX Solutions.

Investors already expect an increase, so any indication Thursday that there won't be a July rate increase could weaken the euro, Trevisani said.

Higher rates tend to increase demand for that region's or country's currency. The Federal Reserve is expected to keep the key U.S. interest rate near zero for a long time _ at least next year, many analysts say _ as the economic recovery weakens.

In other trading Monday, the British pound fell to $1.6352 from $1.6418, while the dollar fell to 80.13 Japanese yen from 80.26 yen.

The dollar edged up to 0.8368 Swiss franc from 0.8362 Swiss franc and rose to 98.06 Canadian cents from 97.73 Canadian cents.