Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Dollar surges to 10-month high versus euro

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- The dollar climbed to a 10-month high versus the euro on Wednesday amid growing concern about struggling European nations.

What prices are doing: The dollar climbed 1.3% versus the euro to $1.3320, the highest level since May 2009, said Brian Dolan, a chief currency strategist at Forex.com.

chart_ws_currency_usd_eur.03.png

The dollar rose 1.13% against the British pound to $1.4877. Against the Japanese yen, the dollar jumped 2.08% to ¥92.27.

On Tuesday, the dollar was lifted against major currencies as investors worried that an agreement on a rescue package for Greece would not be reached at this week's European Union summit.

What's moving the markets: Rating agency Fitch lowered Portugal's sovereign credit rating on Wednesday, fueling further concern about the global economic recovery.

"A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," Douglas Renwick, associate director of Fitch's Sovereign team said in a statement Wednesday.

Worries about financially troubled European countries such as Portugal, Ireland, Italy, Greece and Spain, often referred to as the "PIIGS" nations, have pressured European markets lately and caused investors to turn to the dollar as a safe haven.

Portugal's downgrade comes after reports that Greece may have to turn to the International Monetary Fund for aid, signaling that the debt-ridden nation will be unable to find a solution to its problems on its own.

Assistance from the IMF would also increase speculation among investors that European Union leaders are unlikely to agree on an Greek aid package at Thursday's summit of European Union leaders.

Therefore, adding Portugal's downgrade to the list of euro zone woes does not bode well for the currency, said Dolan.

"This is another nail in the coffin," he said. "It also revitalizes speculation that other euro zone countries may be downgraded as well, with Spain next in line, so we're looking at a further spread of the contagion."

Meanwhile, the U.S. Commerce Department said durable goods orders gained 0.5% in February, the third consecutive increase and in line with expectations.

Durable goods excluding autos rose more than expected, edging up 0.9% after falling 1% in January. Economists were predicting an increase of 0.3%.

What analysts are saying: "The dollar is benefiting greatly from the distress in the euro zone," said Dolan. "It's basically a safe haven flow right now that's driving the dollar higher."

Even if Greece eventually receives financial assistance to lower its mounting debt, the euro's problems won't end there, said Dolan.

"The euro is now being questioned on an institutional level as to whether it can survive this whole fiscal situation," he said. "And when things really look difficult for the euro, the dollar is going to be the primary beneficiary."

Therefore, looking ahead, Dolan expects to see the dollar continue to strengthen versus other currencies as euro zone problems persist and the U.S. economy improves.

"The U.S. recovery is showing signs of picking up steam," he said. "Contrast that with a relatively sluggish recovery in Europe and the U.K. and Japan, and you'll have the dollar benefiting." To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.93%4.14%
15 yr fixed3.03%3.14%
5/1 ARM3.32%3.28%
30 yr refi4.02%4.21%
15 yr refi3.11%3.21%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,745.98 -5.41 -0.03%
Nasdaq 5,128.79 17.06 0.33%
S&P 500 2,108.63 0.06 0.00%
Treasuries 2.27 -0.01 -0.48%
Data as of 7:55pm ET
Company Price Change % Change
Facebook Inc 95.21 -1.78 -1.84%
Bank of America Corp... 18.13 -0.03 -0.17%
Microsoft Corp 46.88 0.59 1.27%
Whole Foods Market I... 36.08 -4.74 -11.61%
Ford Motor Co 15.10 -0.11 -0.72%
Data as of 4:01pm ET

Sections

Loosening state restrictions have given gun silencer sales a boost. Silencers are now legal in 41 states, compared to 37 four years ago. Also some gun makers are making it easy to attach them. More

Pinterest reveals its diversity numbers and announces how it plans to diversify its workforce. More

Fast-food chains that operate in more than 30 locations nationwide are the sole target of a new rule in New York to hike their minimum wage to $15. But consumers and small business owners, as well as some employees, may be the ones to pay the price. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More