Dollar gains as uncertainty swirls

(AP) — The dollar extended its recent gains Friday against the euro and the pound as possible changes in U.S. financial regulations, tightening of monetary policy in China and credit turmoil in Greece drove investors to the perceived safety of the U.S. currency.

The 16-nation euro tilted higher in overnight trading, moving up from the 6-month low of $1.4028 reached in Thursday's trading. But in morning trading in New York, the euro dropped to $1.4092 compared to $1.4103 late Thursday.

The British pound tumbled to $1.6084 from $1.6209 late Thursday. But the dollar slipped to 90.14 Japanese yen from 90.38 yen.

The dollar is benefiting the uncertainty over government actions, which Jeffrey Rosenberg, head of credit strategy research at BofA Merrill Lynch, said was coming from the U.S., Europe and China.

At home, President Barack Obama's new policy proposals that would limit big banks' size and trading practices spooked markets. Trading has been a crucial part of banks' ability to increase profits this year.

Europe, meanwhile, continues to be gripped by concerns over debt levels for some of the weaker members in the eurozone, particularly Greece and Ireland, fueling speculation that they will face tough fiscal measures, such as spending cutbacks and higher taxes, that would limit growth in coming years.

Officials, however, have said Greece should be able to deal with its debt crisis and that they are not worried about a default, although bond markets suggest the risk of a default has increased.

And in China, market-watchers worry the government will start hiking interest rates in order to tamp down the possible formation of asset bubbles as its economy rebounds from the recession.

On Thursday, China said its economy grew 10.7 percent in the fourth quarter, while inflation rose. Analysts say that means China will likely move to curtail bank lending, which would weigh on demand for commodities to power the country's factories, autos and construction, and could hurt trade.

Beijing's policymakers have yet to telegraph clear plans for handling key challenges like asset bubbles, inflation and the country's currency, analysts said.

In other trading, the dollar rose to 1.0592 Canadian dollars from 1.0502 late Thursday, and inched up to 1.0420 Swiss francs from 1.0415 francs.