* Greece debt woes mount; Germany, France deny aid report
* U.S. jobless claims, durable goods weaker than expected
* Yen rises as risk aversion prompts closing carry trades (Adds details, comments, updates prices)
By Wanfeng Zhou
NEW YORK, Jan 28 (Reuters) - The dollar rose on Thursday to its highest level in more than six months against the euro, as persistent concerns over the fiscal health in some smaller euro zone countries weighed on the single currency.
The premium that investors demand to hold Greek government bonds rather than benchmark German Bunds set a euro lifetime high. The cost of insuring Greece's sovereign debt against default also hit a record high. [ID:nLDE60R24B] [ID:nLDE60R1E7]
Germany and France denied a newspaper article suggesting a European Union bailout for Greece was being planned, while Athens said it has asked no country for a bailout and is the victim of speculators intent on attacking a "weak link" in the euro zone. [ID:nLDE60R1FE]
Adding to pressure on the euro were warnings from credit ratings agencies that Portugal needs to come up with a clear plan of further budget consolidation beyond 2010 to prevent downgrades after this year's plan failed to alleviate concerns. [ID:nLDE60R16L]
"The problems facing these peripheral countries are nothing new, and these problems are also not likely to be solved over the near-term," said Win Thin, senior currency strategist at Brown Brothers Harriman in New York. "We expect continued pressure on the bonds of the periphery in the coming weeks, which likely will continue to weigh on the euro as well."
In midday trading, the euro
Traders were watching for a weekly close under $1.3980 to open fresh downside potential.
Chuck Butler, president of Everbank World Markets in St. Louis, said the euro may fall to around $1.38 in the short term, but he said concerns over Greece are somewhat "overblown."
"If the euro is getting punished because of the problems with Greece, the U.S. dollar should be getting punished because of the problems in California. California is the eighth largest economy in the world," he said.
Investors, he said, appear to be "using the Greece thing as an excuse to just do a correction of the currency's run since March last year."
YEN ADVANCES
Against the yen, the dollar fell 0.3 percent to 89.73 yen
U.S. initial jobless claims fell less than expected last week, and durable goods orders increased less than expected in December, denting optimism about the economy and weighing on risk appetite. [ID:nN28241916] [ID:nN27129988]
"The market is a little disappointed in the lack of improvement in labor market conditions," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.
The dollar also gained after the Federal Reserve left interest rates steady near zero on Wednesday, but Kansas City Fed President Thomas Hoenig dissented and wanted the U.S. central bank to eliminate a phrase vowing to keep rates exceptionally low for "an extended period."
This bolstered the view that rates may start to rise later this year, which would boost the value of dollar-denominated assets. [ID:nN27180815]
The dollar was up 0.2 against a currency basket <.DXY> after hitting a 5-1/2-month high of 79.066. It held above its 200-day moving average at 78.32 following a decisive break above that level on Tuesday.
Investors awaited a U.S. Senate vote on Federal Reserve Chairman Ben Bernanke's nomination for a second term. [ID:nN27143856] Polls show that a majority now looks likely. (Additional reporting by Nick Olivari and Neal Armstrong in London; Editing by Leslie Adler)