• Home
• /
• Business

Euro rises against dollar after European Central Bank signals rate increase

BERLIN - The 15-nation euro climbed further Friday against the US dollar after the European Central Bank signaled that rate increases may be in the offing.

The euro bought US$1.5605 in morning European trading, up from US$1.5593 the night before in New York. The British pound dropped slightly to US$1.9576 from US$1.9596 the night before, while the dollar gained to purchase 106.07 Japanese yen from 105.64 yen in New York.

A mini dollar rally against the euro was quickly reversed Thursday after the ECB decided to leave interest rates unchanged, but President Jean-Claude Trichet suggested that the bank might raise them at its next meeting because of concern about inflation.

Higher rates can fight inflation and also support a currency, while lower interest rates can force down a currency as investors seek higher-yielding assets.

The dollar has slumped since the Fed began cutting interest rates in September. It has cut rates seven times, to 2 percent, aiming to kick-start the economy.