By Wanfeng Zhou (Reuters) – The euro fell to a nearly nine-month low against the dollar on Friday as questions remained about a rescue deal for debt-stricken Greece and China unexpectedly raised bank reserve levels.

The euro headed for its fifth weekly drop versus the safe-haven greenback as a lack of details in Thursday’s pledge by the European Union to help Athens kept alive fears of a wider euro zone debt crisis.

That sparked a widening in peripheral euro zone government bond yield spreads against German benchmarks and broader concerns trouble in the currency bloc could hurt global economic recovery.[ID:nLDE61B1GO]

Investor appetite for stocks and higher-yielding currencies like the Australian dollar was further dampened after China raised the level of bank reserves for the second time this year. The move stoked worries aggressive monetary tightening by China may also slow global recovery. [ID:nTOE61B069]

“The European situation is still looming quite strongly and I think that’s really weighing on currencies and equities,” said Fabian Eliasson, vice president of FX sales at Mizuho Corporate Bank in New York. “The problem with the euro now is the uncertainty factor.”

In midday New York trading, the euro EUR= was down 0.4 percent at $1.3625, after dropping to $1.3533, its weakest since May 2009, according to Reuters data.

The euro’s losses pushed the dollar to 80.748 against a currency basket, its highest since July 2009. The ICE Futures’ dollar index .DXY was last at 80.315, up 0.4 percent.

Concern over how Athens will service its debt has hammered the euro — it has fallen nearly 10 percent since late 2009. There are worries Spain and Portugal could face similar debt problems and Europe’s post-recession recovery could falter. [ID:nLDE61B0F4].

Analysts said China’s surprise reserve announcement only aggravated selling in higher risk currencies.

The next steps in the Greece crisis are meetings early next week of EU finance ministers, although analysts said that might still be too early to expect much clarity on what the bloc will do to help Athens tackle its debt. [ID:nLDE61A0W2]

“It’s very difficult to see a silver lining for the euro at the moment as it’s very difficult to see a solution for Greece,” said Jane Foley, currency research director at Forex.com in London.

“And certainly, with China slowing, too, it just enhances the safe-haven behavior toward the dollar.”

SWISS FRANC FALLS

Against the yen, the dollar rose 0.3 percent to 90.02 yen JPY=.

U.S. consumer confidence slipped in February, data showed on Friday, but a stronger than expected rise in retail sales last month suggested households were feeling a bit more comfortable to spend and sustain the economic recovery. See [ID:nN12156724].

Falling risk appetite also hit demand for higher-yielding currencies, with the Australian dollar AUD= down 0.8 percent and the New Zealand currency NZD= off 1 percent against the greenback.

The single European currency also struck a decade low against the Australian dollar EURAUD=R at A$1.5275.

The euro jumped to a session high versus the Swiss franc in late morning trade with traders citing activity by the Swiss National Bank. The Swiss central bank declined to comment on the currency moves.

The euro rose as high as 1.4701 francs, according to Reuters data, and was last trading at $1.4669 EURCHF=, up 0.1 percent on the day. The dollar also gained versus the Swiss franc and last traded at 1.0764 CHF=, up 0.5 percent.

Markets have been on the alert for SNB action over the past year as the bank has tried to weaken the franc as part of its efforts to fight deflation. (Additional reporting by Gertrude Chavez-Dreyfuss and Nick Olivari; Editing by Andrew Hay)

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