By William L. Watts and Lisa Twaronite, MarketWatch
FRANKFURT (MarketWatch) — The dollar rose against most major rival currencies Friday, clawing back losses against the euro as initial euphoria over fresh aid for Greece faded and as investors considered other risks in Europe.
The euro EURUSD -0.23% slipped to $1.4405 from $1.4436 in late North American trading on Thursday. See real-time currency quotes and tools.
The dollar index DXY +0.17% , which tracks the U.S. unit’s performance against a basket of six other currencies, rose to 74.043 from 73.897 late Thursday.
On Thursday, European Union leaders agreed to a new $157 billion bailout plan for Greece. Read full text of euro-zone plan to help Greece.
The leaders emphasized their commitment to remedy the sovereign-debt contagion. Read more on Greece’s bailout plan.
The new plan includes participation from private investors, who would swap their Greek bonds for longer maturities. The Institute of International Finance said 30 global firms agreed to the bond swap, as well as a buyback of a yet-to-be-determined size. See details of Greek bond swap.
The euro posted strong gains in Thursday’s session as progress was seen toward a deal, largely pricing in much of the news, said Jane Foley, senior currency strategist at Rabobank in London.
The $1.45 level continues to mark the top of relatively range-bound activity for the euro, she said.
Skepticism about the long-run ability of the euro-zone plan to prevent contagion could limit the shared currency’s upside versus most rivals, according to Foley.
By the same token, uncertainty about the U.S. government’s debt-ceiling standoff and expectations for the Federal Reserve to maintain monetary policy could allow the euro to eventually score further gains on the greenback, she said.
Meanwhile, even with Greece’s problems solved for now, the euro still has “plenty of other worries to deal with,” said Mitul Kotecha, head of global foreign-exchange strategy at Crédit Agricole Corporate and Investment Bank.
These include divergence in growth across the euro zone, overly long-euro market positioning, euro overvaluation, and likely growth underperformance compared with the U.S. Crédit Agricole maintained its year-end euro forecast of $1.30.
“I still suspect that the momentum will not last, with euro/dollar looking particularly rich at current levels,” Kotecha said in emailed comments.
Also Friday, the dollar USDJPY +0.12% gained on the Japanese yen, buying ¥78.46 vs. ¥78.29 late Thursday. The U.S. unit recovered from a four-month low of ¥78.22 hit earlier.
The British pound GBPUSD -0.15% bought $1.6316, up slightly from its level late Thursday, and the Australian dollar AUDUSD +0.26% changed hands at $1.0869, up from $1.0838.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Lisa Twaronite is MarketWatch's Tokyo bureau chief.
