By Deborah Levine and William L. Watts, MarketWatch NEW YORK (MarketWatch) — The dollar rose against the euro on Friday amid worries that weekend elections in Spain may call into question the country’s willingness to deal with its debt burden. The euro EURUSD -0.6361% fell to $1.4235, down from $1.4308 in North American trading late Thursday. The dollar index DXY +0.45% , a measure of the U.S. unit against a basket of six major currencies, rose to 75.384, up from 75.106 late Thursday. The euro also fell 0.6% against the British pound EURGBP -0.5558% and the Japanese yen EURYEN -0.6163% . The pound GBPUSD -0.0986% bought $1.6235 compared with $1.6231 late Thursday. See real-time currency quotes and tools. The Wall Street Journal on Friday reported that weekend regional and local elections in Spain, which could drive the ruling Socialist party from power in many locations, could reveal piles of unrealized debt. “Any fallout from the elections would likely see Spanish borrowing costs rise as investors fret about the true extent of regional debts along with any disruption to the fiscal consolidation plan caused by any political turmoil spurred by a heavy defeat for the Socialists,” said Kathleen Brooks, research director at Forex.com. Read related MarketWatch coverage from Madrid on elections. For the week, the euro has lost 0.9% amid worries about Greece needing to restructure its debt as well as signs of an intensifying disagreement between some European Union officials and the European Central Bank over whether or how to do that. The losses for the single currency has added to the month’s 3.8% fall that started after European Central Bank President Jean-Claude Trichet hinted that interest-rate hikes wouldn’t come as fast as many in the market anticipated. The dollar has also gained this month as traders have been forced to adjust commodity-related positions, analysts said. However, the euro is still up 6.4% for the year, as the European Central Bank has already raised rates and is still expected to continue doing so sooner and faster than the Federal Reserve, its U.S. counterpart. The European Central Bank will have no choice but to keep raising interest rates in order to fight inflationary pressures, while the Fed’s expected to remain on hold, said Jane Foley, senior currency strategist at Rabobank. On Thursday, the dollar fell after surprisingly weak manufacturing data out of the U.S. Read about dollar, U.S. factory data. “It is clear that the latest U.S. numbers have been on the weak side, but some of this certainly seems related to supply-chain issues due to the Japanese earthquake,” said Adrian Schmidt, currency strategist at Lloyds TSB. It will probably take evidence of significantly more weakness in the United States and in the global economy to trigger a rush into long positions in the dollar, he said. The greenback tends to benefit as investors seek safe havens and eschew risk. No change from Bank of Japan Against the yen, the dollar USDYEN +0.0122% recovered from earlier losses to buy 81.69 yen, compared to ¥81.61 Thursday. The dollar had initially edged higher on the yen in Asian trading, shrugging off a Bank of Japan decision to refrain from further easing, before weakening. As had been widely expected, the central bank decided to keep its overnight call-rate target in a range of zero to 0.1% and maintained its basic outlook that Japan will pick up speed later this year as the nation recovers from March’s disastrous earthquake and tsunami. Read more on Bank of Japan. Some investors had feared that Japanese institutions would repatriate huge quantities of funds after the disaster, and that this would push the yen higher. So far, though, repatriation hasn’t been a huge factor in currency markets. “The degree of balance-sheet stress in the financial sector still looks manageable despite worries about debt waivers by banks and payout claims on insurers, tempering the risk of a repatriation-induced spike in the yen,” said Cameron Umetsu, economist at UBS Securities Japan.

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