By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) — The dollar continued its advance against the euro Thursday, on fears that Greece’s ongoing sovereign debt woes will spread to the rest of the euro zone.
European Central Bank Governing Council member Nout Wellink told Dutch newspaper Het Financieele Dagblad that he favors boosting the European Financial Stability Facility — a sovereign bailout fund for euro-zone countries — to secure private sector support for a second Greek aid package, according to reports.
“Increasingly, the concern is that European policy officials will be unable to prevent a Greek debt default from infecting other highly-indebted euro-zone economies such as Ireland, Portugal, Spain, Italy, Belgium and France,” said strategists at FxPro.
The euro EURUSD -0.65% slipped to $1.4147 from $1.4162 in late North American trading Wednesday, when it made its largest one-day downward move since March 2009. See real-time currency quotes and tools.
“Fears about a contagious, as opposed to a managed, Greek default have intensified,” said strategists at Brown Brothers Harriman.
“The intensifying taxpayer-creditor standoff in Europe and the increasingly precarious domestic political situation in Greece make it unlikely that Europe will resolve the negotiation deadlock over the second Greek package soon, or soon enough to prevent a major rout in global markets,“ they said in a note to clients Thursday.
They added that the Greek 2-year yield shot up 140 basis points to a new high of 27%, but that even more importantly, “signs of spillover intensified.”
The VIX volatility index jumped to the highest level since March 21, closing up 3.1 to 21.32, just below the day’s high at 21.32, they said.
The dollar index DXY +0.18% , which measures the performance of the U.S. unit against a basket of six currencies, was at 75.631, compared with 75.630 late Wednesday.
Against the Japanese yen, the dollar USDJPY -0.32% bought ¥80.62, compared with ¥80.95 late Wednesday.
The British pound GBPUSD -0.53% fell to $1.6162 from $1.6174 late Wednesday, and the Australian dollar AUDUSD -0.60% rose to $1.050 from $1.0546.
Lisa Twaronite is MarketWatch's Tokyo bureau chief.
