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Euro approaches 1.36 dollars
LONDON - The European single currency rose close to 1.36 dollars on Thursday, supported by prospects of an interest rate hike in the eurozone and recovering global financial markets, analysts said.
The yen was under pressure after the Bank of Japan froze its key rate at 0.50 percent, they added.
The euro rose as high as 1.3587 dollars in European morning deals -- which was last seen on August 14. That compared with 1.3541 dollars in New York late on Wednesday.
The dollar increased to 115.89 yen, from 115.31 yen on Wednesday.
“The market’s current view of US rate cuts, and now a boost to an ECB September hike, offers euro/dollar some underpinning,” said Commerzbank analyst Gavin Friend.
The euro has won further support from rebounding equity markets.
The dollar has risen in refcent weeks because it benefits from financial uncertainty as investors regard the US unit as a safe haven.
Most investors expect the US Federal Reserve to cut American borrowing costs from the current level of 5.25 percent at its next planned policy meeting in September.
In contrast, the European Central Bank appears set to hike eurozone-wide interest rates next month by a quarter-point to 4.25 percent, analysts said.
In a statement on Wednesday, the ECB confirmed that its monetary policy stance had not changed from earlier in the month.
ECB chief Jean-Claude Trichet’s use of the codewords “strong vigilance” on August 2 was widely seen as a precursor for a rate hike.
Investors favour currencies with high interest rates, such as the eurozone or Britain, because they offer a higher rate of return than currencies from countries with low interest rates, such as the yen.
Earlier Thursday, Japan’s central bank on Thursday left its super-low interest rates unchanged for a sixth straight month, keeping its powder dry as global markets try to recover from their recent mauling.
The Bank of Japan’s policy board voted 8-1 to maintain the benchmark lending rate at 0.5 percent at the end of a two-day meeting.
Until recently markets had been betting on an August rate hike but plunges in global share prices and a sharp appreciation of the yen prompted analysts to push back their forecasts for when Japanese interest rates will next go up.
On Thursday, the euro was changing hands at 1.3587 dollars, against 1.3541 dollars late on Wednesday, 157.11 yen (154.17), 0.6791 pounds (0.6795) and 1.6371 Swiss francs (1.6337).
The dollar stood at 115.89 yen (115.31) and 1.2081 Swiss francs (1.2062).
The pound was being traded at 1.9960 dollars (1.9925).
On the London Bullion Market, the price of gold rose to 662.05 dollars per ounce, from 659.50 dollars late on Wednesday.
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