Dollar gains on debt fears in US, Europe

AP News
Posted: Jul 18, 2011 3:29 PM
Dollar gains on debt fears in US, Europe

The dollar climbed Monday on worries about the possibility of debt defaults in the U.S. and Europe.

U.S. politicians are fighting about raising the government's borrowing limit. The Treasury Department says the government risks default if there is no deal by Aug. 2.

In Europe, borrowing costs are spiking in Italy and Spain as investors fear that the continent's debt crisis will spread to those larger countries. European Union leaders meet Thursday to negotiate terms for a second bailout for Greece in hope of easing fears over a default that could set off a European banking crisis.

But investors worry that there may not yet be a resolution to Europe's debt crisis with German politicians and European Central Bank officials at odds over how to involve private lenders in a bigger round of aid for Greece.

"The situation is unraveling and so far EU policymakers have yet to come up with a viable solution for Greece, let alone Portugal, Spain or even Italy," said Gluskin Sheff economist David Rosenberg in a research note.

The euro fell to $1.4090 late Monday from $1.4136 late Friday. The British pound dropped to $1.6048 from $1.6123. The dollar slid to 79.05 Japanese yen from 79.11 yen.

The dollar rose to 95.95 Canadian cents from 95.57 cents and to 0.8183 Swiss franc from 0.8141 Swiss franc.

The dollar, along with the franc, the yen and gold, are popular "safe haven" assets with traders and often gain in value when there are worries about financial crises and slowing global growth.