Dollar slides on hopes for debt help in Europe

posted: 10 HOURS AGO

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NEW YORK -The euro extended its rise against the dollar for a second day Tuesday as hopes grew for a solution for helping several European countries manage their deficits.

The euro is still down nearly 5 percent in 2010 over worries about debt levels in Greece, Spain and Portugal.

The 16-nation euro traded at $1.3775 late Tuesday in New York, up from $1.3671 late Monday. Last week, it fell as low as $1.3586, its lowest point since May 2009.

Reports that European Central Bank President Jean-Claude Trichet was changing his travel plans in order to attend a meeting of EU officials on Thursday helped propel the euro, while Greece accelerated planned budget cuts and reforms to bring its finances back in line.

European Union leaders will issue a statement on Greece's debt crisis during a Thursday meeting.

Trichet's expected presence in helping solve European countries' debt problems was a relief to investors, said Dan Cook, senior market analyst at IG Markets, as it augured some sort of solution to the crisis.

Help will likely come in the form of an EU guarantee to backstop debt, said Joseph Trevisani, chief market analyst of FXSolutions.

"The Europeans will do everything they can" to preserve the European Economic and Monetary Union, Trevisani said. The EMU began in 1999 with the creation of the single currency for included European nations.

The euro is expected to keep falling as long as doubts persist about European countries' ability to tackle their deficits, however.

Traders are holding record amounts of bets against the euro, analysts say.

Big deficits can undermine a currency and even threaten the unity of the eurozone. Fears of a default on Greek debt has affected the cost of insuring the bonds of other similarly indebted countries.

In other afternoon trading Tuesday, the British pound rose to $1.5688 from $1.5615, while the dollar climbed to 89.63 Japanese yen from 89.35 yen. The dollar slid, meanwhile, to 1.0689 Canadian dollars from 1.0728 Canadian dollars and fell to 1.0656 Swiss francs from 1.0719 francs.

2010-02-09 16:53:08