EURO SCALES $ 1.60 FOR THE FIRST TIME

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Euro scales $1.60 for first time
The euro has hit a record peak against the US dollar on expectations of higher interest rates in the euro zone.It rose as high as $1.6019 as weak US housing market data underscored fears over the health of the US economy.The euro has rallied in recent months and Tuesday’s peak came as European central bankers raised the prospect of higher rates to control inflation.Higher interest rates make bank deposits and other euro-denominated investments more attractive.Most other central banks are cutting the cost of borrowing as they look to limit the impact of a global economic slowdown.The euro was trading at 80.08 pence, near the record high of 80.98p hit last week.”Interest rate differentials are really favouring the euro right now,” said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.European Central Bank governing council member Christian Noyer said the bank would do what was needed to bring inflation back to its target of just below 2%, adding it would move rates if needed.

That followed similar comments from fellow governing council member Yves Mersch.While the strong euro may be good news for many savers and investors, it poses problems for European exporters because it makes their products more expensive in the United States, a key sales market.On Tuesday, Airbus announced a rise in prices across its range of aircraft, blaming high metals prices and the weakness of the US dollar.The dollar has suffered because the Federal Reserve has cut interest rates sharply in recent months.Industry data on Tuesday showed that sales of existing US homes fell in March as a housing market slump continued.

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April 23, 2008 at 1:34 PM