* Greece debt woes mount; Germany, France deny aid report
* U.S. jobless claims, durable goods weaker than expected
* Yen rises as risk aversion prompts closing carry trades
(Adds details, comments, updates prices)
By Wanfeng Zhou
NEW YORK, Jan 28 (Reuters) - The dollar rose on Thursday to
its highest level in more than six months against the euro, as
persistent concerns over the fiscal health in some smaller euro
zone countries weighed on the single currency.
The premium that investors demand to hold Greek government
bonds rather than benchmark German Bunds set a euro lifetime
high. The cost of insuring Greece's sovereign debt against
default also hit a record high. []
[]
Germany and France denied a newspaper article suggesting a
European Union bailout for Greece was being planned, while
Athens said it has asked no country for a bailout and is the
victim of speculators intent on attacking a "weak link" in the
euro zone. []
Adding to pressure on the euro were warnings from credit
ratings agencies that Portugal needs to come up with a clear
plan of further budget consolidation beyond 2010 to prevent
downgrades after this year's plan failed to alleviate concerns.
[]
"The problems facing these peripheral countries are nothing
new, and these problems are also not likely to be solved over
the near-term," said Win Thin, senior currency strategist at
Brown Brothers Harriman in New York. "We expect continued
pressure on the bonds of the periphery in the coming weeks,
which likely will continue to weigh on the euro as well."
In midday trading, the euro <EUR=> was 0.3 percent lower at
$1.3976. Earlier, it fell as low as $1.3938, its weakest since
mid-July, according to Reuters data.
Traders were watching for a weekly close under $1.3980 to
open fresh downside potential.
Chuck Butler, president of Everbank World Markets in St.
Louis, said the euro may fall to around $1.38 in the short
term, but he said concerns over Greece are somewhat
"overblown."
"If the euro is getting punished because of the problems
with Greece, the U.S. dollar should be getting punished because
of the problems in California. California is the eighth largest
economy in the world," he said.
Investors, he said, appear to be "using the Greece thing as
an excuse to just do a correction of the currency's run since
March last year."
YEN ADVANCES
Against the yen, the dollar fell 0.3 percent to 89.73 yen
<JPY=> as sharp losses on Wall Street prompted investors to
close riskier trades financed by cheap borrowing in the yen.
The euro <EURJPY=R> dropped 0.6 percent to 125.42 yen after
hitting a nine-month low of 125.07 yen.
U.S. initial jobless claims fell less than expected last
week, and durable goods orders increased less than expected in
December, denting optimism about the economy and weighing on
risk appetite. [] []
"The market is a little disappointed in the lack of
improvement in labor market conditions," said Omer Esiner,
senior market analyst at Travelex Global Business Payments in
Washington.
The dollar also gained after the Federal Reserve left
interest rates steady near zero on Wednesday, but Kansas City
Fed President Thomas Hoenig dissented and wanted the U.S.
central bank to eliminate a phrase vowing to keep rates
exceptionally low for "an extended period."
This bolstered the view that rates may start to rise later
this year, which would boost the value of dollar-denominated
assets. []
The dollar was up 0.2 against a currency basket <.DXY>
after hitting a 5-1/2-month high of 79.066. It held above its
200-day moving average at 78.32 following a decisive break
above that level on Tuesday.
Investors awaited a U.S. Senate vote on Federal Reserve
Chairman Ben Bernanke's nomination for a second term.
[] Polls show that a majority now looks likely.
(Additional reporting by Nick Olivari and Neal Armstrong in
London; Editing by Leslie Adler)
