By Deborah Levine and Lisa Twaronite, MarketWatch
NEW YORK (MarketWatch) — The dollar advanced against the euro Friday, with investors dumping the single currency as European political and monetary officials butt heads on how to resolve Greece’s debt problems.
“The uncertainty surrounding Greece remains high,” said currency strategists at Commerzbank. “The euro was unable to avoid this drag causing euro-dollar to ease below $1.45.”
The euro EURUSD -0.40% fell lately to $1.4466 from $1.4508 in U.S. trading Thursday.
The dollar index DXY +0.29% , which measures the performance of the U.S. unit against a basket of six currencies,rose to 74.362 from 74.200 late Thursday.
On Thursday, the euro slipped after European Central Bank President Jean-Claude Trichet hinted that a widely expected July interest-rate hike is likely in the cards, but he also implied that further increases might not be immediately forthcoming. Read more on Trichet’s remarks on Greece and other topics.
However, the nagging concern for traders was Trichet’s opposition to any restructuring of Greece’s debt that would be considered a default.
That contradicts the opinion of many market participants and European officials that a default is necessary and that holders of Greek bonds — which includes the European Central Bank and many European banks — need to bear some of the burden in order for European governments to provide more bailout funding.
DXY 74.38, +0.22, +0.29%
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In particular, analysts said, German lawmakers have insisted on participation by private investors, with one possibility being to swap existing bonds for other securities that are worth less.
“Slow progress on the Greek aid package continues to pose downside risks to the currency along with risk appetite,” said strategists at Brown Brothers Harriman.
A decline in investors’ appetite for risk tends to support the Japanese yen and Swiss franc, which also benefit from their status as safe-haven currencies.
Against the yen, the dollar USDJPY -0.25% bought ¥80.10, down from ¥80.35 late Thursday.
The euro EURJPY -0.57% fell 0.2% against the yen and Swiss franc EURCHF -0.29% .
The British pound GBPUSD -0.62% fell to $1.6278 from $1.6368 late Thursday, when the Bank of England kept its key lending rate at a record low 0.5%.
The Australian dollar AUDUSD -0.37% bought $1.0595, down from $1.0630.
