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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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