Dollar slides on hopes for debt help in Europe

(AP) — The euro extended its rise against the dollar for a second day Tuesday as hopes grew for a solution for helping several European countries manage their deficits.

The euro is still down nearly 5 percent in 2010 over worries about debt levels in Greece, Spain and Portugal.

The 16-nation euro traded at $1.3785 Tuesday afternoon in New York, up from $1.3671 late Monday. Last week, it fell as low as $1.3586, its lowest point since May 2009.

Reports that European Central Bank President Jean-Claude Trichet was changing his travel plans in order to attend a meeting of EU officials on Thursday helped propel the euro, while Greece accelerated planned budget cuts and reforms to bring its finances back in line.

European Union leaders will issue a statement on Greece's debt crisis during a Thursday meeting.

Trichet's expected presence in helping solve European countries' debt problems was a relief to investors, said Dan Cook, senior market analyst at IG Markets. "The breath of life was brought back into what has been a severely battered currency."

The euro is expected to keep falling as long as doubts persist about European countries' ability to tackle their deficits, however.

Traders are holding record amounts of bets against the euro, analysts say.

Big deficits can undermine a currency and even threaten the unity of the eurozone. Fears of a default on Greek debt has affected the cost of insuring the bonds of other similarly indebted countries.

In other afternoon trading Tuesday, the British pound rose to $1.5702 from $1.5615, while the dollar climbed to 89.52 Japanese yen from 89.35 yen. The dollar slid, meanwhile, to 1.0687 Canadian dollars from 1.0728 Canadian dollars and fell to 1.0639 Swiss francs from 1.0719 francs.