AP: Euro rises above $1.30 as worried investors eye US
NEW YORK — The euro rose Friday to its highest level in two months, topping $1.30 as worried investors shift their focus from the European debt crisis to slowing growth in the U.S.
The dollar also hit a low for the year versus the Japanese yen as investors sought out the Japanese currency as their preferred "safe-haven" asset.
The dollar got a huge boost this year as European governments said their debts were swelling, triggering fears about the effect of defaults on European banks and slashed government spending on weak economies. But easing concerns about a banking crisis in Europe, coupled with declining interest rates in the U.S., are now weighing on the dollar, said Ashraf Laidi, the chief market strategist at CMC Markets in London.
The yen, meanwhile, is likely to stay in demand as the primary safety currency buy as long as traders worry about slower economic growth in the U.S., said UBS analyst Manuel Oliveri. The dollar bottomed at 86.27 yen Friday, its weakest point since December. Later in the morning, it traded at 86.45 yen, down from 87.46 yen Thursday.
The euro climbed as high as $1.3007 Friday before settling back to $1.2939 in morning New York trading. The euro hasn't touched $1.30 since May 10. It was worth $1.2897 late Thursday.
The 16-nation currency has risen about 8 percent from a four-year low below $1.19 in early June.
The euro's recovery is thanks to "a combination of some alleviation of pressure in Europe and lackluster data out of the U.S.," said Bob Sinche, chief strategist at Lily Pond Capital Management.
Investors watched successful bond auctions in Greece, Portual and Spain, countries under intense scrutiny this year because of their big budget deficits and weakening economies. The Europeans have set in place huge funds to provide emergency financing to countries that are not able to raise money in capital markets. European countries have been writing new budgets with big cuts in spending.
"It is as if some sort of tectonic shift took place late May to early June. The news stream from Europe became decidedly less negative and the U.S. news stream took a clear turn for the worse," said Marc Chandler, head of currency strategy at Brown Brothers Harriman in New York.
News of a more pessimistic U.S. outlook from the Federal Reserve was followed Thursday by reports that manufacturing activity is slowing. Manufacturing had been the bright spot of the U.S. recovery. A measure of consumer confidence released Friday suggested consumers were growing more worried as unemployment remains high.
The Labor Department also said Friday that the prices consumers pay dropped in June, the third straight decline. Falling prices will prevent the Federal Reserve from raising rates from their current record low near zero. Higher rates would make the dollar a more lucrative investment.
Instead, as U.S. investors seek safety in government debt, bond yields are declining. That makes investing in the dollar a less attractive option than in currencies in countries whose debt has higher yields.
In other trading Friday, the British pound dropped to $1.5343 from $1.5413, while the dollar rose to 1.0479 Swiss francs from 1.0434 francs, and gained to 1.0525 Canadian dollars from 1.0380 Canadian dollars.
