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Dollar fluctuates in thin trading before holiday
12/23/10 15:45 ESTNEW YORK -The dollar fluctuated in thin trading Thursday before the holiday weekend.
The euro veered sharply higher in the early afternoon after falling earlier in the day. In late trading in New York, the euro rose to $1.3114 from $1.3089 late Wednesday. Earlier on Thursday, the euro had dropped to $1.3054, its weakest point since Nov. 30.
"When we get very illiquid market conditions — in August or late December — you have speculative elements in the market that try to take advantage of volatility," said Michael Woolfolk, a currency strategist with Bank of New York Mellon.
The euro has dropped more than 8 percent since early November because of a jump in borrowing costs in several European countries due to investor worries about swelling deficits. The European Union and International Monetary Fund have already bailed out Greece and Ireland, and investors worry that Portugal or Spain may be next.
On Thursday, an Irish court approved a government takeover of Allied Irish Banks PLC, the fourth nationalization of a major financial institution. Fitch ratings agency downgraded the debt of Hungary and Portugal.
In other trading, the British pound rose to $1.5424 from $1.5371 late Wednesday, while the dollar dropped to 82.89 Japanese yen from 83.59 yen. The U.S. currency rose to 0.9596 Swiss francs from 0.9527 Swiss francs.
The U.S. dollar fell against most other currencies as an improving outlook for the U.S., the world's largest economy, helped spark investor demand for currencies of countries that have higher interest rates than the U.S.
The key U.S. interest rate has been near zero since December 2008. Higher interest rates make a currency more attractive for investors seeking bigger returns.
Various reports from the U.S. government showed slowing layoffs, higher factory orders and increased consumer spending. Sales of new homes ticked higher.
The dollar skidded to 1.0102 Canadian dollars from 1.0137 Canadian dollars, while the Australian dollar jumped to $1.0043 from 99.97 U.S. cents. The dollar was also weaker against the Brazilian real and the Scandinavian currencies.
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