Dollar Rises to One-Year High vs. Euro

By Joe Manimbo of Travelex.

The U.S. dollar rose to a new one-year peak against Europe's embattled common currency as growing worries about the continent's debt crisis continued to unsettle investor sentiment. The euro's losses have accelerated this week on concerns Athens' debt troubles will not be confined to Greece. Already this week, the euro has shed about 3% against the safe-haven dollar, while it's down more than 9% in 2010.

The prospect of a widening debt crisis in the eurozone rattled investors worldwide on Tuesday, fuelling a flight to quality towards the U.S. and Japanese currencies. Public strikes around Athens this week have reinforced worries that Greece will not be able to implement austerity measures that are needed to help shrink its debt load.

The British pound slipped to a five-week low against the dollar, though it rose to a near nine-month peak against the broadly weaker euro. Political uncertainty ahead of a national election on Thursday in the U.K. should keep the pound vulnerable in coming sessions. The Canadian dollar neared a six-week low against its U.S. rival, pulled lower by the sharp decline in market sentiment on worries about a growing debt crisis in Europe that has roiled financial markets.

Investors on Wednesday will focus on U.S. data on the jobs market and the key services sector which accounts for the majority of U.S. economic activity.

EUR: The single currency tumbled to a fresh April 2009 low against the dollar overnight as worries of a deepening fiscal debt crisis in Europe badly tarnished euro sentiment. Despite the latest efforts by European officials and the International Monetary Fund to come to Greece's rescue, investors are increasingly distancing themselves from the euro on fears other vulnerable regions in the bloc such as Portugal and Spain might be next in line to seek a hefty financial bailout.

Although the European Union and the IMF agreed on a 110 billion euro package for cash-strapped Greece, investors fear that Athens won't be able to successfully implement tough austerity measures designed to get its debt load under control. Violent protests in Athens this week underscored the public's resistance to government plans to raise taxes and reduce salaries.