LONDON, May 18, 2011 (AFP) - The euro rose on Wednesday as the dollar was hit by poor data, but gains were capped by European debt fears before publication of minutes from the US Federal Reserve's last rate meeting.
The European single currency firmed to $1.4248 in early London deals, from $1.4234 late in New York on Tuesday.
Against the Japanese currency, the dollar eased to 81.05 yen from 81.36 yen on Tuesday.
The dollar has stumbled as new data showed that home construction in the United States plunged in April, underscoring the depth of the nation's years-old housing crisis.
Housing starts tumbled 10.6 percent from March to a seasonally adjusted annual rate of 523,000, the Commerce Department reported on Tuesday.
"The single currency has had a fairly good 24 hours, despite some talk of 'soft restructurings' or 're-profiling' of Greek debt by European officials," said said Michael Hewson, an analyst at traders CMC Markets.
"This was probably more as a result of US dollar weakness than euro strength after some extremely poor US housing data, while US industrial production disappointed as well."
The batch of negative economic data was "further reinforcing concerns about a slowdown in US growth for the second quarter", Hewson added.
Later, investors would take in the minutes from the last Federal Reserve policy-setting meeting.
The central bank left ultra-low interest rates unchanged for some time in a bid to shore up the economy's fragile recovery from recession.
Earlier this week, the euro was hurt by concerns over bailout talks for indebted eurozone nations after IMF head Dominique Strauss-Kahn was arrested and refused bail over sexual assault claims.
In the end, European finance ministers still managed to approve a 78-billion-euro bailout for debt-laden eurozone nation Portugal on Monday.
At the same time, ways of reorganising Greece's debt are being debated by senior EU officials.
The head of eurozone finance ministers Jean-Claude Juncker said on Tuesday that a "soft restructuring" of Greece's debt was a possibility, as an EU-IMF mission in Athens was extended by one week.
Greece has accumulated a debt of 340 billion euros ($483 billion) and with the country in the process of tough austerity measures and struggling to emerge from recession, many investors doubt Athens can manage repayments.
A "soft" debt restructuring is understood to involve extending repayment schedules and easing interest rates on the debt. A so-called "hard" restructuring is considered to mean states writing off a part of their debt.
However any restructuring of Greece's massive debt would be a recipe for disaster, European Central Bank governing board member Juergen Stark told a conference near Athens on Wednesday.
"It is an illusion to think that debt restructuring, haircut or whatever would help to resolve the problems this country is facing," Stark told an Economist round-table conference in the coastal resort of Lagonissi.
"Debt restructuring is a recipe for catastrophe," he said, warning that such a move would undermine the collateral adequacy of Greek government bonds and thereby "wipe out" Greek banks who use them to obtain ECB loans.
A 'haircut' is a restructuring that entails losses for bond holders.
In London on Wednesday, the euro changed hands at $1.4248 against $1.4234 late in New York on Tuesday, at 115.50 yen (115.79), A£0.8800 (0.8759) and 1.2550 Swiss francs (1.2535).
The dollar stood at 81.05 yen (81.36) and 0.8808 Swiss francs (0.8801).
The pound was at $1.6190 (1.6248).
On the London Bullion Market, gold prices increased to $1,491.25 an ounce from $1,479 late on Tuesday.
