Dollar rebounds amid renewing Greece debt concerns

11:19, March 19, 2010      

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The dollar rebounded against major currencies on Thursday as renewing concerns over Greece's debt crisis boosted safety-haven demand for the greenback.

Greece warned Thursday that it would be forced to ask the International Monetary Fund (IMF) for help if European leaders fail to offer financial help next week.

Greece might not need money from the EU, but a clear aid plan would thwart speculation, Greek Prime Minister George Papandreou told the European Parliament.

Papandreou said Greece had put forward additional austerity measures in early March and its tough austerity program "can not sustain" if the market did not act positively and the country had to borrow money at higher rates to refinance its debt.

Earlier on Monday, Eurogroup Chairman Jean-Claude Juncker said after the monthly meeting of eurozone finance ministers that the ministers "clarified modalities enabling a decision on coordinated action and which could be activated swiftly in the case of need."

But Juncker said the final decision on how to help Greece was up to the EU leaders but that might not happen until their next summit on March 25-26.

German chancellor Angela Merkel reiterated on Wednesday that Germany would not provide financial help to Greece. She also urged stricter rules for the euro, saying that it would be possible to exclude a country from the eurozone if it no longer fulfills the conditions over a long term.

The dollar was also boosted by speculation that the U.S. Federal Reserve may raise the discount rate it charges on loans to banks before its next monetary policy meeting.

A month ago, the U.S. central bank announced the first increase of discount rate in nearly three years in response to the improvements in the functioning of financial markets. Economists expected that the Fed will continue winding down the special liquidity facilities it created during the crisis and normalizing its lending to commercial banks through the discount window.

The euro bought 1.3679 dollars in late New York trading compared with 1.3753 dollars it bought late Wednesday. The pound fell to 1.5307 dollars from 1.5329 dollars.

The dollar rose to 1.0099 Canadian dollars from 1.0091 Canadian dollars, and moved higher to 1.0573 Swiss francs from 1.0529 Swiss francs. It strengthend to 90.39 Japanese yen from 90.20 Japanese yen.

Source:Xinhua
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