Dollar reverses losses vs. euro

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- The dollar regained ground against the euro Wednesday in a thin trading day as investors remained skittish about European debt concerns.

What prices are doing: The dollar rose 0.3% against the euro to $1.2618, and 0.9% versus the pound to $1.4823.

chart_ws_currency_usd_eur.03(2).png

The U.S. currency was up 0.5% against the Japanese yen at ¥93.14.

What's moving the market: The euro had gained earlier, after a report released early Wednesday showed the euro zone's gross domestic product grew 0.2% in the first quarter. This was in line with analysts' estimates.

The pound lost ground amid political concerns. The Conservative Party's David Cameron was named Britain's new prime minister Tuesday, but with a hung Parliament vote the future of the British government had been in question.

The Conservatives and the Liberal Democrats Party are forming a coalition government, edging out the long-reigning Labour Party.

What analysts are saying: The overseas concerns led investors to flee to the dollar, which is considered a safe-haven currency, noted Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

"Earlier the euro enjoyed a feel-good relief rally," Woolfolk said, "but much like Monday's gains, this rally did not have legs."

The euro had soared Monday on the announcement of a nearly $1 trillion European rescue package, but by Wednesday investors "failed to be assuaged" by the rescue plan, Woolfolk said.

He expects continued risk aversion will support the dollar and yen in the coming weeks, and volatility is likely in an "illiquid, skittish" market. To top of page

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