By Lisa Twaronite and Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — The dollar extended losses against the euro on Friday, after the single currency turned up in the European session, as investors breathed a collective sigh of relief that the continent’s political leaders appear more likely to agree on a way to help Greece bear its debt burden.
The euro EURUSD +0.56% rose to $1.4289, from $1.4197 in late North American trading Thursday. See real-time currency quotes and tools.
The dollar index DXY -0.33% , which measures the performance of the U.S. unit against a basket of six currencies, turned down to 75.090 from 75.476 Thursday.
As with most of the week, news about Greece and Europe has driven trading in currencies often linked to investors’ shift in or out of currencies considered risky or safer.
The Japanese yen and Swiss franc tend to benefit when investors want safety, while the British pound can gain along with riskier assets like stocks and commodities.
The euro EURJPY -0.02% rose 0.1% against the yen and 0.4% versus the Swiss franc EURCHF +0.59% .
Against the Japanese yen, the dollar USDJPY -0.59% slipped to ¥80.22, compared with ¥80.58 late Thursday.
The British pound GBPUSD +0.14% rose to $1.6176 from $1.6152. The euro EURGBP +0.43% advanced 0.5% versus sterling.
German Chancellor Angela Merkel said Friday a new aid program is needed for Greece and the participation of the private sector in it should be voluntary. Merkel made the comments at a joint news conference with French President Nicolas Sarkozy, with both emphasizing they want a quick solution on the Greek issue and that they will work to preserve the stability of the euro.
“The market continues to be dominated by developments in Greece with speculation over progress on the new aid package fueling consolidation in the safe havens,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
Traders also noted a report in a Greek publication Banking News, which said the aid package would total 150 billion euros, including 80 billion euros in additional aid from the European Union. Another 30 billion to 40 billion euros would come from a voluntary rollover of Greek debt and 50 billion euros would come from privatization, according to the story. See Greek story on aid package.
Analysts will also continue to watch the unfolding political turmoil in Greece itself, as Greek Prime Minister George Papandreou shuffled his cabinet in an attempt to appease the populace and win support for the widely unpopular austerity measures necessary as part of the country’s previous bailout.
That shuffle includes naming Evangelos Venizelos to replace George Papaconstantinou as finance minister, according to media reports. Papaconstantinou will become environment minister, while Venizelos was defense minister. See story on Greece’s cabinet.
Friday’s move is only a sight improvement in a week when the euro has swung wildly, but it pares the week’s loss to 0.5%.
“For the time being, the benefit of doubt goes to the bears, as progress on the issue remains limited,” aid Boris Schlossberg, director of currency research at GFT.
The euro fell to a three-week low against the U.S. dollar Thursday on concerns that the country will receive the near-term funding it needs. The currency then rebounded. Read more on euro, dollar Thursday.
“Markets continued to take solace from the likelihood that the next tranche of Greek aid would indeed be forthcoming,” said Michael Turner, strategist at RBC Capital Markets.
Lisa Twaronite is MarketWatch's Tokyo bureau chief.
