Dollar slides to 2009 low versus euro

The euro rose to $1.3996 on Friday, after passing the key $1.40 mark to touch $1.4049 earlier. That was up from $1.3904 in late North American trading Thursday.

The dollar index /quotes/comstock/11j!i1:dx\y (DXY 80.19, -0.60, -0.74%) , a measure of the greenback against its major counterparts, fell to the lowest level since December. It traded at 80.045 from 80.554 late Thursday.

The index has lost about 3.6% this week, the worst performance since March. The euro has gained about 3% versus the U.S. currency and the British pound is up more than 4%.

"We've turned to a more dollar-bearish environment," said Nic Pifer, head of global fixed income at RiverSource Investments, who helps oversee $4.6 billion. "As markets start to loosen up again and risk appetite comes back into vogue -- in high-yield debt, emerging markets and equities -- that safe-haven demand for the dollar has dissipated."

Trading volume across most markets was light ahead of a three-day weekend in the U.S. and U.K.

"In the near-term, the stars are aligned against the U.S. dollar," said foreign exchange strategists at Brown Brothers Harriman in a note.

"If the news stream is good, we are told investors are less risk averse and do not need the dollar's security. If the news stream is poor, we are told the U.S. is in horrific shape and the budget deficit and Fed's balance sheet will swell even more" to the detriment of the dollar.

"It is difficult to see what will break this psychology in the coming weeks," they added.

The British pound also rose to its highest level since November versus the U.S. currency, shaking off a Standard & Poor's report Thursday saying the ratings agency might downgrade the U.K.'s AAA credit rating. The pound traded at $1.5925 from $1.5848 late Thursday.

The dollar inched up against the Japanese yen, at 94.77 yen compared with 94.34 yen Thursday. Japanese officials said they wouldn't intervene in the currency market to keep down the recently sizzling Japanese unit. See full story.

Several analysts' notes earlier also acknowledged reports about concern that the U.S. will maintain its AAA credit rating, after the U.K.'s top-tier rating was given a negative outlook by Standard & Poor's on Thursday.

"I don't think institutional investors are all that concerned over what S&P may do in the future," said Christopher Sullivan, chief investment officer at United Nations Federal Credit Union.

"We would have to see a continuing onslaught of real deterioration in the U.S. financial situation for its rating to come under threat," he said. "The dollar's issues are mostly related to quantitative easing and how inflationary that might be. Also, risk aversion has lessened considerably" in recent months.

Minutes of Fed policy makers' last meeting released Wednesday indicated a possibility that the Fed would buy more Treasury or mortgage-related debt. Those kinds of programs to keep borrowing costs low for consumers, companies and home buyers are considered quantitative easing and negative for the currency