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Dollar Climbs to Highest Level in 13 Months Against Euro

July 05, 2005|From Associated Press

FRANKFURT, Germany — The dollar hit its highest level against the euro in more than 13 months Monday after economic data painted a rosy picture of the U.S. economy and as traders waited to see whether the European Central Bank would cut interest rates this week.

The euro fell as low as $1.189 in Europe -- its lowest point since May 20, 2004, when it dropped to $1.189 -- before recovering slightly to $1.190 in early evening trading. That's compared with $1.195 in New York late Friday.

The euro surged to an all-time high of $1.367 at the end of December on worries about the wide U.S. trade and budget deficits. The dollar has since rebounded with rising interest rates and the prospect for the trend to continue.

Carsten Fritsch, a currency strategist with Commerzbank, said the dollar was buoyed by the interest rate increase last week by the Federal Reserve and rises in U.S. manufacturing and consumer sentiment indexes.

Fritsch said comments by France's Christian Noyer, a member of the European Central Bank's governing council, that a country could exit the 12-member euro zone, also were forcing the common currency lower.

The central bank, which has held interest rates at 2% for two years, meets Thursday amid calls from politicians to lower borrowing costs to spur growth in Europe.

Speculation has mounted that the central bank may move to cut interest rates after Sweden's Riksbank unexpectedly cut its own interest rate to 1.5% last month.

The Bank of England, which also meets this week, has been holding its key interest rate steady at 4.75%, but analysts said it might move to cut that in light of increasingly poor economic data in Britain.

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