By Virginia Harrison, MarketWatch
SYDNEY (MarketWatch) — The U.S. dollar weakened against the Japanese yen on Monday, but extended its gains versus the euro against the backdrop of persistent European debt woes.
The dollar index DXY +0.22% , which measures the greenback against a basket of six currencies, rose to 75.990 from 74.867 in late North American trading on Friday.
Against the yen, the U.S dollar USDYEN -0.3607% fell to ¥82.91 from ¥83.58 on Friday.
The euro dropped to $1.4380, down from $1.4429 in North American trading on Thursday. See real time currency quotes and tools.
European debt concerns continue to weigh on the currency, after a German official said the nation would support a voluntary restructuring by Greece of its debt.
“Germany’s public comments about Greek debt restructuring, which European sources have indicated could happen in 2012 if not forced sooner by the market turmoil, have resurrected market fears about Europe’s ability to avoid default,” strategists at Brown Brothers Harriman said in a research note.
“Market fears have been fanned by rating agency Standard and Poor’s call that potential write-offs on Greek debt could reach 70%, while European sources suggest that Greek debt repayments will be pushed back by 30 years, which would clearly translate into significant net present value losses for investors,” the strategists said.
“The euro’s strength this year has been a waiting game on how long the markets can shrug off fears about eurozone default. This waiting game stops with the inevitable scenario of Greek debt restructuring, which will cause collateral damage to Europe’s banking system and contagion across Europe’s most vulnerable sovereign borrowers,” the strategists added.
The Australian dollar USDAUD -0.3991% rose 0.1% to $1.0567, shrugging off the impact of tighter Chinese policy.
Over the weekend China raised its bank reserve requirement for the fourth time this year. Read more about the rise in China’s reserve requirement.
“The Australian dollar appears to have weathered the latest installment of Chinese tightening fairly well. Generally speaking, commodity prices have not shown any adverse effects to anticipation of further Chinese rate hikes, which is allowing the Australia dollar to better absorb tightening moves by China than was previously the case,” Tim Waterer, senior FX dealer at CMC Markets said in a note to clients.
