Dollar near nine-month high against euro

The dollar clung near nine-month highs against the euro today as investors fretted European Union leaders might fail to settle…

The dollar clung near nine-month highs against the euro today as investors fretted European Union leaders might fail to settle a budget dispute.

Poor growth prospects and political upheaval since the French and Dutch votes against the proposed EU treaty have prompted many investors to bail out of the single currency, favouring the dollar despite recent mixed US data.

European Commission President Jose Manuel Barroso said that a failure to resolve the budget problem and move forward with the constitution would push Europe into "permanent crisis and paralysis".

The euro fell as much as 0.5 per cent and traded near $1.2070 not far from a nine-month low around $1.2015 yesterday.

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For the moment, option-related buying around $1.20 is supporting the euro. In just three months the euro has tumbled more than 10 per cent against the dollar, with its slide accelerating after French and Dutch voters rejected the EU constitution.

Against the yen, the dollar traded around 109.30 yen after hitting a new eight-month high around 109.70 yen earlier in the week. The yen showed no reaction to Japanese machinery orders data, which was slightly better than forecast.

Core private orders, a gauge of capital spending, fell 1 per cent in April, better than an expected fall of 2 per cent, after posting solid gains the prior two months.