U.S. DOLLAR LOSES GROUND AGAINST EURO

[Anonymous]

Dollar’s downward slide continues
The
dollar has continued its downward slide against the euro, slipping to
20-month lows.The dollar fell to $1.3172 against the euro overnight,
before recovering to $1.3121 in mid-morning trade.Calls
for “collective vigilance” from France’s finance minister, amid fears
the fall may drive up European export prices, triggered the
improvement.Thierry Breton added that the strong euro would be
discussed by European Union finance chiefs later on Monday.Meanwhile,
sterling rose to $1.9371 against the dollar, buoyed by strong housing
market figures.

Economic worries
The dollar has taken a hit
in recent days as economic data prompted concerns about the health of
the US economy.US monetary policy chiefs are widely expected to cut
rates in coming months, while growth forecasts have been cut and the
country’s housing market is suffering from a slowdown.Meanwhile recent
figures show that consumer spending growth is expected to slow slightly
over the all-important Christmas shopping period.In contrast, data from
the eurozone has given a boost to the euro.Recent figures have shown an
unexpected rise in German business sentiment and French business
confidence is at five-year highs.”This is very much a case of strength
in the European currencies,” said Teis Knuthsen, Danske Bank foreign
exchange chief.”I think the European growth outlook has been reassessed
following quite strong economic numbers,”However, the improvement in
the euro’s fortunes has prompted concern about exports.Shares in
carmakers Peugeot, Renault, BMW and DaimlerChrysler have all been
pressured by the news.

Dollar loses ground against euro
The dollar has plunged to its lowest level against the euro since April 2005 amid concerns for the US economy.
The
euro surged to $1.3086 against the dollar, with many other currencies
following suit.Sterling rose almost 1% to $1.93, the yen hit a
two-month high and Russia’s rouble rose to a seven-year high.Analysts
have voiced concerns about the US economy after the White House
downgraded its growth forecasts amid a sharp slowdown in the housing
market.Meanwhile, expectations that the European Central Bank is once
again about to raise interest rates gave a lift to the euro.Recent
figures showing an unexpected rise in German business sentiment – its
seventh quarterly rise in a row – also helped. So did French data
showing that business confidence held at five-year highs in
November.However, traders added that thin trade as a result of the US
Thanksgiving holiday might have benefited the euro.”For the time being,
the news flow is favouring the euro. If we close above $1.30 today, the
key will be if we reject all of this as a Thanksgiving phenomenon or
not,” said Ian Gunner, head of foreign exchange research at Mellon
Bank.

[Author]

November 27, 2006 at 10:04 AM