MW: Dollar modestly higher as Greek uncertainty continues
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar gained ground versus most major rivals Friday, extending the week's strong gains versus the euro amid continued uncertainty over the shape of a bailout plan for Greece.
The euro (CUR_EURUSD 1.3565, -0.0044, -0.3234%) , which had traded around $1.3800 early in the week on optimism over Greece, changed hands at $1.3575 in recent action, down from $1.3620 in North American trade late Thursday.
The dollar index (DXY 80.49, +0.27, +0.33%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, rose to 80.513, up from 80.228 Thursday for a week-to-date gain of 0.9%.
News reports said German officials have indicated support for a joint bailout of Greece by European governments and the International Monetary Fund if Athens needs aid.
Greek Prime Minister George Papandreou on Thursday pressed for a guarantee of financial support at a European Union summit set to take place next week.
Backing by Germany and other countries of an IMF bailout has spotlighted a rift within the euro zone. France and the European Central Bank have in the past rejected talk of IMF involvement. Critics say bringing in the IMF would be a black mark against European economic and monetary union.
Germany's support for IMF involvement marked a surprise turnaround that caught markets off-guard, said Marco Valli, economist at UniCredit Bank in Milan.
The euro, however, is likely to see a sharp intensification of selling pressure only if it breaks below $1.3530, according to UniCredit strategists.
The euro (CUR_EURCHF 0.0000, 0.0000, 0.0000%) , meanwhile, continued to drop versus the Swiss franc, a day after a Swiss National Bank policymaker was quoted as saying Switzerland should prepare for higher interest rates and a Swiss franc that responds fully to market pressures. Read about the Swissie's ongoing rise.
The euro traded at 1.4343 Swiss francs in recent action, a loss of 0.3% on the day.
The British pound (CUR_GBPEUR 1.1171, -0.0030, -0.2678%) , which had enjoyed apparent short-covering rallies earlier in the week, was under more pressure Friday, even falling versus the broadly-lower euro.
The pound traded at $1.5139 versus the dollar, a loss of 0.7%. The euro rose 0.4% against sterling to change hands at 89.53 pence.
Strategists tied weakness in part to remarks by Andrew Sentance, a member of the Bank of England's Monetary Policy Committee, who told CNBC that a double-dip recession couldn't be ruled out, although a gradual economic recovery is more likely.
The dollar rose versus the Japanese yen as investors covered positions ahead of a three-day weekend in Japan. The greenback fetched 90.43 yen, up from 90.30 yen late Thursday.
Meanwhile, a Chinese official fired another salvo in the ongoing U.S./China currency dispute, in which U.S. politicians have said they believe the Chinese currency is undervalued.
He Ning, head of the Department of American and Oceanian Affairs at China's Ministry of Commerce, said Friday that China's purchases of the U.S. government debt have helped stabilize U.S. capital markets, and trade between the two nations has also created U.S. service jobs, according to Dow Jones Newswires.
Ning was "basically warning the U.S. to back off as speculation mounts that it could be named as a currency manipulator by the U.S. Treasury," analysts at Action Economics said.
