By Bradley Davis Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The euro fell against the dollar Thursday as concerns once again heated over the region's simmering issues of sovereign debt.
Illustrating the increasing worry over the region's fiscally stressed periphery, the cost to insure against default on government debt issued by Portugal, Ireland and Spain all hit record highs.
"Pressure relating to the debt crisis is rising in the euro zone," said analysts at Commerzbank in Frankfurt.
Thursday morning, the euro was at $1.3703 from $1.3780. The dollar was at Y82.26 from Y82.30, while the euro was at Y112.72 from Y113.42. The U.K. pound was at $1.6132 from $1.6118. The dollar was at CHF0.9694 from CHF0.9713.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.928 from 77.652.
Euro-zone officials were out in force to calm markets, with European Commission President Jose Manuel Barroso telling reporters in South Korea, where he was attending the summit of the Group of 20 industrialized and emerging nations: "The EU is ready to support Ireland."
Ireland especially has been under the investor microscope this week, as some investors have speculated the fiscally strapped country, which is trying to implement stark budget cuts, might eventually have to tap an European Union-International Monetary Fund rescue package, something IMF, Irish and EU leaders have said is not imminent.
With bond markets in the U.S. and Canada closed for the holiday, currency trading was expected to be thin, but in lightly traded markets, small orders can have an exaggerated impact; a drop in the euro below $1.3650 could trigger a sharp, quick two-cent loss for the common currency, according to a Brown Brothers Harriman technical analysis.
Also leading investors away from higher-yielding asset was a reading of Chinese inflation figures that showed an higher-than-expected increase, triggering speculation China could tighten policy to put a brake on its growth.
Slowing the economic behemoth of China, with its voracious appetite for commodities, would dent the commodity-linked dollar bloc, including the Canadian, Australian and New Zealand dollars, all of which declined Thursday against the U.S. dollar.
The Australian dollar also was weighed down by an unexpected increase in domestic unemployment.
Separately, currency investors were focused on talks as the two-day summit of the G-20 leading and industrial nations got under way in South Korea.
U.S. President Barack Obama, spending the bulk of his bilateral meeting with Chinese President Hu Jintao discussing foreign exchange policy, pressed Hu on the importance of continuing appreciation of the yuan, a U.S. Treasury official said, according to a pool report.
Under Secretary for International Affairs Lael Brainard told pool reporters that Hu reiterated Beijing's strong commitment to a more flexible exchange rate regime and noted the progress achieved thus far.
China's yuan rose to another high against the U.S. dollar late Thursday as Beijing set a sharply lower daily dollar/yuan fixing. On the over-the-counter market, the dollar was at CNY6.6257 around 0930 GMT, down from Wednesday's close of CNY6.6337. It traded between CNY6.6173, the lowest intraday level since the yuan began trading regularly in 1994, and CNY6.6380.
At 6.6173 to the dollar, the yuan had appreciated 3.2% against the U.S. unit since June 19, when China pledged to increase the flexibility of its exchange rate and effectively ended a two-year-long dollar peg.
Canada Morning
The Canadian dollar slipped from near-parity with the U.S. dollar Thursday morning, losing ground as the greenback made broader gains.
The U.S. dollar was at C$1.0030, from C$1.0002 late Wednesday, according to CQG.
The Canadian dollar's move lower was tempered, however, with the currency bolstered by the strength in oil prices. Investors remain nervous, fretting about Europe's high-debt periphery and awaiting news from the G-20 summit in South Korea.
There are no data releases planned, and bond markets are closed in observance of Remembrance Day.
-By Bradley Davis, Dow Jones Newswires; 212-416-2654;
bradley.davis@dowjones.com
(Karen Johnson in Toronto, Ian Talley in Toronto, and Jean Yung in Shanghai contributed to this article.)
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