Euro closes in on record high against dollar

LONDON - The euro moved nearer a new all-time high against the dollar Tuesday as investors waited anxiously for an expected US interest rate cut next week amid growing fears of a US recession, dealers said.

By (AFP)

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Published: Tue 11 Sep 2007, 5:24 PM

Last updated: Sat 4 Apr 2015, 11:38 PM

The European single currency rose to 1.3821 dollars -- the highest point since August 8. It later stood at 1.3819 dollars, compared with 1.3797 dollars in New York late on Monday.

The dollar gained to 113.75 yen, from 113.69 yen late on Monday.

In July the euro jumped to 1.3852 dollars -- the highest level since its creation in 1999 owing to the high level of European interest rates and concerns over a weaker US economy.

While the European Central Bank is forecast to lift eurozone borrowing costs in the coming months to at least 4.25 percent, the US Federal Reserve is set to cut US borrowing costs from 5.25 percent.

‘The dollar remains undermined by the increasing prospect of monetary easing by the Federal Reserve as it attempts to forestall the US economy from slipping into recession,’ Derek Halpenny, senior currency economist at The Bank of Tokyo-Mitsubishi, said in London on Tuesday.

A Fed rate cut would reduce the yields on US financial assets which could in turn cut capital flows into the US, weighing on the dollar, dealers said.

‘As far as today is concerned, the main event is Bernanke’s speech at theBundesbank on global imbalances,’ said David Corbell, an analyst at Thomson IFR Markets.

The Fed’s chairman Ben Bernanke has already indicated that the central bank is ready to cut rates to protect the national economy from the ill effects of a global credit crunch.

His comments a couple of weeks ago, which were made before the news of the 4,000 fall in non-farm payrolls in August, cemented market expectations that the Fed will cut its rates a quarter point.

Traders will be closely following Bernanke’s speech to the German central bank due later Tuesday for further clues on future US monetary policy.

The euro was changing hands at 1.3819 dollars, against 1.3797 dollars late on Monday, 156.95 yen (156.87), 0.6807 pounds (0.6806) and 1.6395 Swiss francs (1.6375).

The dollar stood at 113.75 yen (113.69) and 1.1883 Swiss francs (1.1867).

The pound was being traded at 2.0277 dollars (2.0271).

On the London Bullion Market, the price of gold climbed to 705.20 dollars per ounce, from 703.50 dollars late on Monday.



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