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Euro at Record High Against Dollar

May 27, 2003|From Reuters and Bloomberg News

TOKYO — The euro broke its all-time high against the U.S. dollar today, reaching $1.1885 in early trading here.

The euro's rally has been stoked over the last week by traders' sense that the Bush administration no longer follows a "strong dollar" policy, and in fact is content to see the buck decline -- because that can help the competitiveness of U.S. exports overseas.

The euro's previous peak was $1.1884 on Jan. 4, 1999, three days after its official launch.

The currency then entered a long decline that saw it bottom around 83 cents late in 2000. But it has been rallying for the last 12 months, and particularly since the start of this year, when it was at $1.04. It traded at $1.183 on Friday in New York.

But heading toward the next European Central Bank policy meeting June 5, traders said the market will start to grapple with the probability that the bank will cut interest rates -- which could dampen the euro's strength.

In Germany on Monday, a business confidence index was reported to have risen unexpectedly in May from a 16-month low, which suggested there is less risk that Europe's largest economy will slip into its second recession in as many years, analysts said.

Still, many experts believe the European Central Bank soon will cut its benchmark short-term interest rate from the current 2.5%. That is twice the level of the U.S. Federal Reserve's key short-term rate.

The yen, meanwhile, was weakened Monday after reports of a large earthquake in northern Japan. Also, Japan's Mizuho Financial Group, the world's largest bank by assets, posted that country's biggest corporate loss, barely a week after the government was forced to rescue Resona Holdings, Japan's fifth-largest bank.

But Tokyo's Nikkei-225 stock index managed to advance, adding 42.56 points, or 0.5%, to 8,227.32.

Most foreign markets were little changed with no direction from Wall Street, where markets were closed in observance of Memorial Day.

German stocks inched up, with the DAX index rising 5.45 points, or 0.2%, to 2,828.28.

Canadian stocks closed mostly flat, while in Mexico City the IPC index lost 41.14 points, or 0.6%, to 6,545.78.

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