Euro pushes above $1.29 for first time in 2 months as worries about US recovery fester

Euro pushes above $1.29 for first time in 2 months

NEW YORK — The euro moved above $1.29 for the first time in more than two months Thursday as the dollar was weighed down by renewed concerns about the U.S. economic outlook.

The euro rose to trade as high as $1.2917, its highest level since May 10. In late trading in New York, the euro was worth $1.2897, compared with $1.2731 late Wednesday.

The 16-country currency has recovered from a four-year low of $1.1878 on June 7 as investors factor in a weaker U.S. economic outlook, along with the heavy levels of debt weighing down European government finances.

On Wednesday, the Federal Reserve released minutes from last month’s meeting showing that officials thought the economic outlook had “softened” and that further steps to boost the U.S. economy might be necessary. The Fed cut its forecast for U.S. economic growth to 3.0-3.5 percent this year from the 3.2-3.7 percent range predicted in April.

The Fed is now expected to keep interest rates at their current record low for a long time. Some economists had thought earlier this year that the Fed might raise rates in 2010.

Janet Yellen, nominated for vice chairman of the Fed and considered a “dove” on monetary policy, said at a congressional confirmation hearing Thursday that job creation must be a high priority of monetary policy.

Doves are said to be more concerned about high unemployment than rising inflation, and would be slower than “hawks” to argue for higher rates.

U.S. economic data was mixed Thursday. Jobless claims dropped last week, an improvement, but manufacturing slowed in June. Wholesale prices fell for a third straight month. Rising prices could prompt the Fed to raise rates.

The euro was also supported Thursday by the news that Greece’s private Piraeus Bank said it is offering to buy stakes in state-controlled ATEbank and Hellenic Postbank from the government for 701 million euros.

Greece’s debt crisis triggered the nearly $1 trillion European emergency financing aid deal and set off fear about borrowing costs spiking in other countries, as well as the risk of default to European bank balance sheets.

“Allowing weaker banks to be absorbed could reduce the risk of bank failure and provide an alternative to government support,” said Jane Foley, research director at Forex.com.

In other late trading Thursday, the British pound surged to $1.5413 from $1.5253, while the dollar edged up to 88.46 Japanese yen from 88.28 yen. The dollar also tumbled to 1.0434 Swiss francs from 1.0550 francs, but rose to 1.0380 Canadian dollars from 1.0352 Canadian dollars.

Pylas contributed from the London bureau.