Spain's financial woes boost US dollar

NEW YORK (AP) - Spain's debt and banking sector problems refocused attention on Europe's debt crisis Wednesday, boosting the dollar against the euro and most other major currencies.

Worries about European debt, faltering growth prospects in several countries using the euro and the punitive effects of government spending cuts have weighed on the euro this year. The currency shared by 16 nations hit a four-year low below $1.19 last week and has dropped more than 15 percent this year against the dollar.

Investors are buying the dollar in search of safety because of worries that Europe's problems could slow the global recovery from the recession.

In morning trading in New York, the euro dropped to $1.2259 from $1.2349 late Tuesday. It has gained this week after positive economic data from around the world seemed to reassure investors that Europe's debt crisis had not yet weighed significantly on global trade.

The British pound dropped to $1.4753 from $1.4817, while the dollar fell to 91.21 Japanese yen from 91.38 yen. Traders also perceive the yen to be a safe-haven currency.

Investors are worried that Spain's financial problems could snowball into a crisis like the one in Greece. The threat of Greece's woes spreading across Europe prompted the European Union and International Monetary Fund to put together in May an emergency financing package of more than $900 billion for euro countries. Spain is a much bigger economy than Greece. A crisis there could have even deeper repercussions for the world economy.

Spain's borrowing costs leapt Wednesday, a day after the European Union said it would have to make more spending cuts in order to cut its deficit.

Spain's deficit is supposed to drop to 3 percent of gross domestic product in 2013 from 11.2 percent in 2009. Meanwhile, a finance official said Spanish banks were having trouble getting credit.

The government denied reports that Spain was getting a financial rescue from the EU, IMF and the U.S. Treasury. A Spanish newspaper had reported that the trio was working on a deal that would extend a euro250 billion credit line to Spain.

In other morning trading, the dollar fell to 1.1326 Swiss francs from 1.1334 francs, but rose to 1.0310 Canadian dollars from 1.0263 Canadian dollars.