Dollar steadies against euro after slump

LONDON: The dollar steadied against the euro on Wednesday as investors paused for breath after the greenback had sunk to a three-week low point against the single currency on US debt strains.

In London deals, just before Standard and Poor's downgraded Greece's sovereign debt rating by two notches, the European single currency stood at $1.4373 after earlier striking $1.4536, the highest level since July 5. The euro had traded at $1.4509 late in New York on Tuesday.

Earlier on Wednesday the dollar hit a four-month low versus the Japanese currency, at 77.58 yen. But it ended the day at 78.01 yen compared with 77.94 yen late on Tuesday.

"Worryingly for Europe's leaders it looks like last week's debt deal for Greece may not have placated the markets, and Italian and Spanish bond yields continue to rise," Kathleen Brooks at Forex.com said.

Simon Denham of trading group Capital Spreads said: "In the foreign exchange markets it's been the real safe haven currencies that have benefitted the most throughout this extra ordinary time for financial markets, with the Swiss Franc being one of the most popular amongst them.

"Against the US dollar it has hit a new high... and the same can be said for the euro and sterling.

Gold, also seen as a safe bet in troubled economic times, has itself profitted from US debt tensions, and ended the day at $1,625.00.

Earlier on Wednesday gold hit a record high of $1,625.70 an ounce on the London Bullion Market. That beat the previous record of $1,624.07 set on Monday.

In Washington, Republicans and Democrats are deadlocked with the clock ticking towards the official make-or-break date for averting a possible US debt default.

Commerzbank analysts said investors were "waiting for Godot".

"Two actors and nothing is happening. The financial markets are waiting for the all-important news that the US will raise its debt ceiling, but tonight Republicans and Democrats seem to be getting nowhere once again - just like the actors in Samuel Beckett's play," Commerzbank said.

While markets expect lawmakers to eventually avert a default, the continued impasse raises the threat of the world's biggest economy running out of money to pay its bills and service debt on August 2.

And even if a default is averted, investors are concerned that the standoff may lead to a downgrade of the United States' top-notch credit rating.

On Wednesday in London, the euro changed hands at $1.4373 against $1.4509 late in New York on Tuesday, at 112.14 yen (113.02), £0.8789 (0.8842) and 1.1545 Swiss francs (1.1620).

The dollar stood at 78.01 yen (77.90) and 0.8032 Swiss francs (0.8009).

The pound was at $1.6353 (1.6409).

On the London Bullion Market, gold prices jumped to $1,625.00 an ounce from $1,612.75 on Tuesday.

Copyright AFP (Agence France-Presse), 2011