Sun, Dec 19, 2004 - Page 10 News List

Euro rallies as German business confidence improves


The US dollar traded lower on Friday as markets shrugged off expected data on US inflation and shifted toward the euro after a better-than-expected report on business confidence in Germany.

The euro was quoted at US$1.3287 in late trading in New York, up marginally from US$1.3249 late Thursday in New York.

In late trading in New York, the dollar edged up to 1.1582 Swiss francs from SF1.1575, but slipped to ¥104.31, down from ¥104.78, and C$1.2271, down from C$1.2335. The British pound was higher at US$1.9384 from US$1.9309.

The euro, which had fallen strongly Thursday against the dollar on a smaller-than-expected third quarter US current account deficit, rallied on news that a key indicator of German business confidence rose to its highest level in eight months.

The IFO economic institute said its widely watched index rose by 2.1 points to 96.2 points, while analysts had forecast it would fall 0.2 points to 93.9 points.

The rise, a positive sign for Europe's largest economy, caught markets off-guard because the index had fallen to 94.1 points last month, its lowest level in 14 months.

The market largely brushed off a report showing US consumer prices up 0.2 percent last month, in line with forecasts.

"The 0.2 percent month-on-month increases in both headline and core consumer prices in November would seem to support the Fed's belief that inflation remains `well contained,'" said Paul Ashworth, economist at Capital Economics.

Although the US dollar is holding above recent lows as the year draws to a close, no clear market theme exists to swing the dollar higher or lower, said Ryohei Muramatsu at Commerzbank AG in Tokyo.

"Foreign investors will likely close their books by Monday and resume building positions after Christmas," he said. "Profit-taking, especially on the euro long positions, is expected to support the dollar until Christmas, but the euro is likely to resume its climb next year."

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