NEW YORK – The dollar soared against the euro Monday as a European rescue deal for Ireland failed to calm investor worries about the prospect of bailouts for other European countries.
In late trading in New York, the euro dropped to $1.3116 from $1.3237 late on Friday. It had earlier fallen below $1.31 for the first time since Sept. 21.
The fear about a spreading debt crisis in Europe gave the dollar a boost against currencies around the world as investors sought safety. The U.S. currency tends to gain in times of international turmoil and investor anxiety.
The British pound fell to $1.5565 from $1.5602, while the dollar rose to 84.24 Japanese yen from 84.07 yen.
The European Union agreed on Sunday to give euro67.5 billion (about $89 billion) in bailout loans to Ireland, following the euro110 billion package created for Greece in May.
The EU also sketched out new rules for future emergencies in an effort to restore faith in the euro.
But borrowing costs for Spain and Portugal are still rising, indicating investors remain nervous about financial conditions in those countries.
Spain and Portugal are both holding bond auctions this week, and their borrowing costs could jump significantly from rates at recent auctions. Weak auctions would likely increase investors’ expectations that Spain and Portugal would need bailouts of their own, Credit Suisse analysts wrote in a research note.
An emergency financing package for Spain, which is a much larger economy than Ireland, Portugal or Greece, would “probably be the final straw” for Germany, said Michael Woolfolk, a currency strategist at Bank of New York Mellon Corp. Germany is Europe’s biggest economy.
“Germany, its patience wearing thin already, would not be willing to underwrite any further bailouts beyond Spain,” Woolfolk said.
In other trading Monday, the dollar dipped to 1.0196 Canadian dollars from 1.0199 Canadian dollars, and fell to 1.0005 Swiss francs from 1.0030 Swiss francs.
