FOREX-Euro falls as debt nerves return, dollar gains





The euro fell on Friday following a new bout of market jitters over the euro zone's sovereign debt problems, while the dollar struck a one-month high against the yen after data underscored recovery in the U.S. jobs market.

U.S. Treasury yields have spiked this month, shoring up the dollar while improving data has supported the view that economic recovery in the United States is on more durable ground.

Data on Thursday showed new applications for unemployment benefits dropped to a 2-1/2 year low last week, consistent with other indicators suggesting a strengthening labour market.

"The focus is on interest rates and the U.S. has lagged behind most especially the euro zone," said Paul Robson, currency strategist at RBS Global Banking.

"The improvement in the labour market bodes well for the dollar while for the euro, there is a risk of disappointment as peripheral debt problems return."

The dollar index .DXY, which measures the greenback's performance against a basket of currencies, was up 0.5 percent at 78.640. The dollar touched its highest level in a month at 83.60 yen JPY= to trade up 0.3 percent on the day.

Traders highlighted a chunky dollar/yen expiry for Friday's New York cut at 84.00 yen, with more sizeable interest at the same level also reported to come on Monday.

The dollar also benefited from safe-haven flows after Egypt's President Hosni Mubarak refused to step down as had been expected, keeping alive the risk of a possible showdown between protestors and the military and more political chaos in the Middle East