Euro rises to fresh high versus dollar

LONDON - The euro hit record highs versus the dollar for a second day yesterday, boosted in thin trade by worries about the US current account deficit and economy and apparent lack of official concern at the dollar’s slide.

By (Reuters)

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Published: Sat 25 Dec 2004, 11:19 AM

Last updated: Thu 2 Apr 2015, 11:49 AM

The euro pushed above the key $1.35 level to a fresh all-time high versus the dollar on Thursday after US new home sales tumbled 12 per cent in November, the sharpest decline in more than a decade.

Among other US figures released on Thursday, US durable goods orders showed a strong overall reading in November, but much of the gain was in the volatile transportation industry and the data failed to give the dollar a boost.

“Momentum is once again against the dollar and the fundamental concerns about the US deficits remain,” said Chris Gothard, currency strategist at Brown Brothers Harriman in London.

"This is going to be an issue which hurts the dollar in the new year also. Technically there’s also pressure on the dollar and in a thin market there isn’t much support for it.”

The euro has risen more than 7 per cent against the dollar so far in 2004, boosted by concern the United States needs a lower dollar to narrow its huge current account gap.

Meanwhile, investors see little likelihood of near-term official action to stop the dollar’s rot, with Dutch Finance Minister Gerrit Zalm saying yesterday that the euro’s rise was still within acceptable margins.

The euro traded as high as $1.3546 by 1205GMT, according to Reuters data, up 0.2 per cent on the day.

It also rose against the yen to 140.30 yen, close to recent 18-month highs above 140.50.

The dollar traded at around 103.60 yen, unchanged from late US trade and at the lower end of recent ranges.

The euro was at 70.24 pence, close to one-year highs against sterling set on Thursday on speculation that the next British rate move will be a cut.

Europe was largely on holiday for Christmas Eve yesterday, although London was open until about 1200GMT. The US bond market is shut for the day.

Zalm, whose country holds the rotating European Union president, made his comments on the euro in Paris daily La Croix.

He also said he hoped the European Central Bank would soon raise interest rates since “that would be sign that European growth has taken off”. However, ECB chief economist Otmar Issing indicated there was no pressing need for a rise in interest rates. He was quoted on Friday as saying inflation rates in the region were heading back down towards the 2 per cent level the central bank defines as price stability.

Finance ministers from the Group of Seven rich countries club will meet in London on Feb 4 and 5 for their first regular meeting under Britain’s presidency, the UK Treasury said yesterday.

They will then meet again in London on June 10 and 11.

Although traders said that thin trade ahead of Christmas likely exaggerated price movements, the latest round of US data seemed to vindicate the belief of dollar bears that the currency’s decline would continue well into next year. “There’s still no real underlying enthusiasm for the dollar,” said Daragh Maher, currency strategist at Calyon in London.

Among the US data released on Thursday was the personal consumption expenditures price index, known to be a favourite of the Federal Reserve. The index held steady at an annual rate of 1.5 per cent for its core reading in November.

That suggested the Fed had little need to be more aggressive in raising rates.

The University of Michigan consumer sentiment index rose to 97.1 in December from 92.8 in November. That was more than the 95.7 predicted by analysts but was ignored by the market.

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