The US dollar rallied this week, mainly driven by risk-aversion investments at a time when eurozone countries were mired in a deadlock over solutions to the worsening Greek debt crisis.

Reflecting its view that there’s a significantly higher likelihood of one or more defaults of Greek debt, Standard and Poor’s on Monday downgraded Greece’s sovereign rating by three notches from B to CCC, marking it the lowest rating the agency give to a country currently.

But the euro only dipped slightly against the greenback during Monday’s trading as concerns over the US economic prospects offset the Greek debt worries.

As EU members failed to agree on a new Greek bailout plan at a meeting held Tuesday in Brussels, the bloc’s single currency retreated broadly in the next day’s trading session.

As the meeting turned out, the main division ran between the European Central Bank and Germany. While the bank opposes any form of Greek debt restructuring or other moves that could be perceived by the market as default, Germany hopes to restructure Greek’s debts and bring in private participation.

In addition to the lack of unity among Greece’s lenders, a 24-hour strike in Greece against the government’s new austerity plan also pushed the investors to sell euros, which resulted in euro’s nearly 2-per cent decline against the dollar in Wednesday’ s trading session, to the lowest level in a month.

However, the International Monetary Fund (IMF), another lender, weighed in Thursday, saying Greece can count on its help if it continues to reform its economy. European Union economics commissioner Olli Rehn also said he is confident that eurozone

would finally agree to pay the next installment of loans to Greece over the weekend.

A consensus on Greece bailout seemed more likely amid reports on Friday that Germany backed down and agreed not to involve private investors. The euro recovered slightly on Friday. For the whole week, it lost 2.6 per cent to 1.431 against the dollar.

Meanwhile, the market was still haunted by worries over US economic recovery as the US Commerce Department reported Wednesday that retail sales slipped 0.2 per cent in May, the first time in 11 months and a separate report from the Labor Department said producer prices rose 0.2 per cent in the same month.

On Thursday, the Labor Department said the consumer price index climbed a seasonally adjusted 0.2 per cent in May, and the core rate of inflation, which excludes food and energy costs, rose 0.3 percent, the fastest pace since July 2008, showing that the inflation was spreading more widely.

The Empire State index fell to -7.8 in June from 11.9 in May, according to the Empire State manufacturing survey released Wednesday by the New York Federal Reserve. The negative figure suggested that manufacturing activities deteriorated sharply in New York region, raising concerns about slowdown in manufacturing sectors.

The dollar index, which is regarded as the best gauge of its performance against a basket of six currencies, rose 0.3 per cent to 74.983 this week.

Against the Japanese yen, the dollar dipped 0.3 per cent as the Japanese central bank decided Tuesday to keep its key interest rate unchanged in a range of zero to 0.1 per cent after its two-day monetary policy meeting.

As for other currencies, the dollar gained 1.6 per cent against the British pound and 0.7 per cent against the Swiss franc this week.

News: Daily sun/ Bangladesh/ Jun-19-2011