The dollar gained the most since August against six major counterparts as concern that Europe?s debt problem will worsen and military action in Korea will escalate boosted demand for the U.S. currency as a refuge.
The greenback rose against the yen for a fourth straight week, the longest streak in 20 months, after North Korea shelled a South Korean island and said ?escalated confrontation? will lead to war. The euro fell for a third week versus the greenback as investors speculated Portugal and Spain will be the next European countries to need a financial rescue. The U.S. added jobs in November for a second month, data next week may show.
?The euro has further to fall against the dollar,? said Kathy Lien, director of currency research at online currency trader GFT Forex in New York. ?If there is a war amongst the Koreas, the yen would fall off aggressively against the dollar.?
The Dollar Index rose for a third week, gaining 2.4 percent, the most since the five days ended Aug. 13, to 80.382. IntercontinentalExchange Inc. uses the gauge to track the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona. It reached 80.522 yesterday, the strongest level since Sept. 21.
The euro tumbled 3.2 percent to $1.3242, from $1.3673 Nov. 19. The three-week decline was its longest since May. The 16- nation currency has lost 5.1 percent this month. It slid 2.5 percent against the yen to 111.37, from 114.23 last week.
Longest in 20 Months
The greenback rose 0.7 percent against the yen to 84.10, from 83.55 yen. It was the fourth weekly gain, the longest winning streak since the six weeks ended March 6, 2009.
Europe?s common currency fell against 14 of its 16 major counterparts as the bonds of the region?s most-indebted countries dropped after Ireland agreed to become the second nation to seek a bailout, after Greece. The Financial Times Deutschland reported euro-area policy makers were pushing Portugal to follow suit to shield Spain from contagion.
The extra yield investors demand to hold Irish 10-year bonds instead of their German counterparts rose to a euro-era record 6.56 percentage points, while the spread of Portugal?s 10-year debt over German bunds touched 4.55 percentage points. The Spanish-German 10-year spread increased to 2.64 percentage points, according to Bloomberg generic data. That?s the most since the introduction of the euro in 1999.
Finance Minister Elena Salgado of Spain said there?s ?absolutely? no risk that her country will need a bailout.
Rating Cut
Standard & Poor?s Ratings Services lowered Ireland?s long- term sovereign rating two steps to A from AA-. Irish officials raced to complete an aid-package deal before financial markets reopen next week.
?The story in Europe is going to continue; they won?t be able to stop the contagion to other countries,? said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal. ?All Asian currencies are suffering from the tensions in Korea. Those two things are really causing the market to take pause.?
The yen was poised for a 4.4 percent monthly loss versus the dollar, weakening from 15-year highs it reached in October, as the U.S. dispatched the aircraft carrier USS George Washington to take part in naval exercises off the Korean coast.
?If there is an escalation in the Korean tensions, then that certainly is a negative for Japan?s already-struggling economy,? said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. ?The proximity to the crisis might be something that?s keeping investors wary of the Japanese yen.?
Won Plunges
The South Korean won fell the most in five months as North Korea said the naval exercises naval exercises moved the peninsula ?closer to the brink of war.? The North Korean artillery attack on Nov. 23 killed four people.
The won slid 2.2 percent, the most since the five days ended June 11, to 1,159.63 per dollar.
Canada?s dollar gained against 15 of its 16 most-traded counterparts for the week even as it lost 0.4 percent to C$1.0213 per dollar as European and Korean concerns damped investor risk appetite. It strengthened 1.5 percent, the biggest daily jump in almost three months, on Nov. 24 as Russia said it began adding the currency to its international reserves.
?So far the amounts are very small, but there?s perhaps potential for increasing our holdings,? Alexei Ulyukayev, first deputy chairman of Russia?s central bank, said in an interview in Moscow.
The Australian dollar, called the Aussie, touched the lowest level in seven weeks against the greenback after Reserve Bank Governor Glenn Stevens said the nation?s interest rate is appropriate for the ?period ahead.? It fell 2.2 percent to 96.45 U.S. cents, from 98.66 on Nov. 19, and touched 96.13.
New Zealand?s dollar was the worst performer among major currencies. It tumbled 3.7 percent, the most since the five days ended Aug. 13, to 74.99 U.S. cents amid shrinking risk appetite.
The U.S. economy added 145,000 jobs in November after a gain of 151,000 in October, according to the median forecast of economists in a Bloomberg News survey before the Labor Department reports the data on Dec. 3.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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