By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar rose Monday to its strongest level against the euro since late September as investors picked up on speculation that Ireland may soon seek some sort of financial assistance.
The U.S. dollar index (DXY 78.22, +0.14, +0.18%) , which measures the greenback against a basket of six major currencies, climbed to 78.356 from 78.106 late Friday. It touched 78.562, the highest level seen since early October. See more tools and data on currencies trading.
“As the sovereign bond markets continue to anticipate a potential Irish bailout ahead of a meeting between finance ministers across Europe tomorrow, the euro continued its broad decline,” said Chris Walker, currency strategist at UBS. “The dollar remained stable as the focus [is] firmly on the European debt woes.”
The euro (EURUSD 1.3660, -0.0044, -0.3210%) traded at $1.3640, down from $1.3696 in late North American trading Friday. It fell as low as $1.3601, just a hair above its weakest level since September, touched Friday.
News reports over the weekend and Monday said Ireland was under pressure from Germany and other European Union counterparts to seek a bailout in order to prevent turmoil from spreading in the financial markets, even though Ireland doesn’t need to return to credit markets until the middle of next year. Read about Ireland.
As Walker indicated, speculation has mounted that Ireland may request aid ahead of a meeting of European finance ministers on Tuesday. A European Commission spokesman in Brussels said reports Ireland was facing pressure to accept a bailout amounted to exaggerations and repeated that Dublin hasn’t requested external aid.
”Is a deal good for the euro? The consensus view is that it is, though if all we see next is a shift in the focus toward Portugal and then Spain, it’s hard to see how the crisis is put resoundingly to bed,” said Kit Juckes, head of forex strategy at Societe Generale.
Also Monday, the European Union statistics agency revised higher its forecast of Greece’s government deficit, to 15.4% of gross domestic product from an earlier estimate of 13.6%.
Greece, in turn, boosted its forecast of its 2010 deficit to 9.4% of GDP — an improvement that would nonetheless underscore the challenges the country faces in getting its books in order, analysts said.
Against the Japanese yen (USDYEN 82.7200, +0.2600, +0.3154%) , the dollar traded at ¥82.95, up from ¥82.49 late Friday.
“We think that the [U.S. Federal Reserve’s] Treasury purchases [which began last Friday], will cap [dollar-yen] topside, and we maintain our three-month forecast of ¥82,” analysts at Barclays Capital said in a note to clients.
Trading in the dollar also played off a pair of U.S. economic reports showed manufacturing activity around New York weakened this month while retail sales were strong in October. See story on Empire survey. Read about retail sales.
The British pound (GBPUSD 1.6113, -0.0034, -0.2106%) traded little changed at $1.6108.
