Dollar Hits 10 1/2 Month High Against Euro
Friday June 24, 4:11 pm ET
By David Rising, Associated Press Writer
Dollar Hits 10 1/2 Month High Against Euro Before Retreating Slightly on Europe Rate Speculation
BERLIN (AP) -- The dollar hit a 10 1/2 month high against the euro Friday, dipping below $1.20 briefly before regaining some traction as speculation continued that the European Central Bank might be shifting its monetary policy stance.
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In early European trading the 12-nation euro hit $1.1984, the lowest level since Aug. 4 when it traded at $1.1970. It rebounded by the end of the day to $1.2095 in New York, slightly higher than the $1.2033 it bought late Thursday.
The dollar rose to purchase 109.13 Japanese yen from 108.83 the night before, and rose against the British pound to $1.8221 from $1.8154 in New York. The dollar slipped to 1.2741 Swiss francs from 1.2794, and inched up to 1.2328 Canadian dollars from 1.2327.
The euro started losing ground early in the week amid speculation the ECB might follow the Swedish Riksbank decision Tuesday to cut interest rates to 1.5 percent.
Germany's economics minister suggested later Tuesday it was time for the ECB to consider a cut, but on Wednesday Deutsche Bundesbank President Axel Weber weighed in, saying, "I regard such demands as being not helpful."
Lower rates can boost economic growth by encouraging borrowing and investment, but can weaken currencies by reducing returns on fixed-income investments.
On Friday, European Central Bank President Jean-Claude Trichet said at the ZEW economic forum in Mannheim that current low rates are supportive of the financial system, comments that had little effect on the euro.
Though Trichet has repeatedly noted that rates are at historical lows, the bank has shifted its stance on cuts. After flatly ruling out the possibility of future rate cuts for most of 2005, ECB officials are now saying they are neutral.
The dollar was helped Thursday after the U.S. Labor Department reported that the number of Americans filing new applications for unemployment benefits fell by 20,000 last week to 314,000.
It was also affected by testimony in Washington by Federal Reserve Chairman Alan Greenspan, who said there was "no credible evidence" U.S. manufacturing activity or factory jobs would be helped by China changing its currency system.
Though the euro has fallen to its current level from an all-time high of $1.3667 at the end of December, it remains strong on continuing worries about the widening U.S. trade and budget deficits.
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