By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- Fears of a sovereign default in southern Europe kept the U.S. dollar near a seven-month high on Monday as the greenback shows it still serves as a safe haven when investors step away from taking risks.
The euro reclaimed a little lost ground
on hopes that the European Union could eventually mount a rescue effort.
Still, strategists warned that fiscal concerns would likely continue to cast a cloud over the shared currency.
"The backdrop of the ghastly Greek situation just won't go away," said Andrew Wilkinson, senior market analyst at Interactive Brokers. "The dollar seems to have given over its crown of least appeal to the Euro-zone for now and is faring better as a safe haven basis."
The euro (CUR_EURUSD 1.37, +0.00, +0.07%) fell to $1.3620 before recovering to traded at $1.3674, compared to $1.3659 in North American trade late Friday.
The dollar index (DXY 80.34, -0.11, -0.14%) , which tracks the greenback against a trade-weighted basket of six major currencies, was higher into the early U.S. session, trading little changed at 80.285.
The dollar bought 89.43 Japanese yen, from 89.36 yen last week.
On Friday, the dollar index touched 80.683, the highest level on a closing basis since July as investors looked to move assets from equities and riskier assets to relatively safer territory in the wake of a dip in U.S. nonfarm payrolls for January. See Friday's Currencies column.
"The U.S. dollar has benefited from being the 'anti-euro' in an environment where sovereign risk concerns in Europe have again thrown into question the long-term viability of currency union without political union," said HSBC currency strategists led by David Bloom.
European Union officials attending the weekend meeting of finance ministers and central bankers from the Group of Seven industrialized nations offered a united front on Greece, saying they were confident Athens would be able to cut its deficit and vowing to closely monitor the Greek government's efforts.
Economists said the meeting offered little in the way of concrete assurances about the situation in southern Europe, however.
Uncertainty about the likes of Greece, Spain and Portugal likely spelled further weakness for the euro ahead, said Simon Derrick, currency strategist at Bank of New York Mellon.
The Greek government aims to slash its deficit from 12.7% of gross domestic product in 2009 to 2.8% -- under the euro-zone's 3% limit -- by 2012.
Greek government bonds have tumbled and the cost of insuring Greek debt against default has soared since December on fears about Greece's ability to meet its debt obligations. Worries about the health of Spain and Portugal also rose last week.
