Sun, Dec 14, 2003 - Page 10 News List

The euro continues breaking records against greenback

AFP , LONDON

The euro shot up to another record against the dollar here Friday, breaking through the US$1.23 barrier after the US reported a widening in its trade deficit and raised fresh concern about imbalances in its economy.

The single currency in late-day trade was at US$1.2289 against US$1.2218 in New York late on Thursday. The euro at one point soared to US$1.2301 dollars, beating its previous high of US$1.2280 set earlier in the day.

The euro has now gained about 17 percent on the US currency since the start of the year.

Against the yen the dollar was trading at ¥107.77 after ¥107.95 on Thursday.

The widening US trade deficit in October sparked fears about the US economy's capacity to continue financing its shortfall in the current account, which in addition to trade in goods and services includes certain financial transfers.

The US Commerce Department said the trade gap widened to US$41.8 billion in October from September's US$41.3 billion, execeeding the consensus forecast of Wall Street economists.

The persistent deficits have rattled foreign investors who have lately begun to shun dollar-based assets.

In addition, according to economists at Credit Suisse First Boston, more and more central banks are building up their hard currency reserves in euros and other currencies rather than dollars, which drives up the value of the European currency along with the pound sterling and the Swiss franc.

They have found that central banks had 64.5 percent of their hard currency reserves in dollars last year, down from 67.5 percent in 2001.

Sentiment on the dollar is "clearly negative," said Julian Jessop, an analyst at Standard Chartered.

The dollar took another hit Friday from the University of Michigan consumer sentiment index, which fell to 89.6 in December from 93.7 last month.

The decline was unexpected, as the consensus forecast had been for sentiment to improve to 95.6.

The euro was changing hands at US$1.2289 from US$1.2218 late on Thursday in New York, ¥132.45 (¥132.07), £0.7030 (£0.7000) and 1.5505 Swiss francs (Sf1.5503).

The dollar stood at ¥107.74 (¥107.95) and 1.2611 Swiss francs (Sf1.2684).

The pound was at US$1.7485 (US$1.7454), ¥188.36 (¥188.36) and 2.2052 Swiss francs (Sf2.2134).

On the London Bullion Market, the price of an ounce of gold stood at US$407.10 against US$404.10 dollars on Thursday afternoon.

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