Sun, Jun 12, 2005 - Page 10 News List

Euro closes week at nine-month low against US dollar

AFP , NEW YORK

The US dollar rose to its highest level against the euro in nine months on Friday after the US trade deficit came in somewhat better than expected.

The euro bought US$1.2122 at 9pm GMT from US$1.2227 late on Thursday in New York. Earlier the euro had tumbled to US$1.2106, its lowest level since Sept. 8, after the publication of the US trade data.

The US dollar rose to ¥108.65, from ¥107.41.

Though the US trade deficit widened in April to US$57 billion from US$53.6 billion in March, it was better than the US$58 billion pencilled in by analysts.

Because March's shortfall was not as bad as the US$55 billion indicated in last month's data release, analysts said Friday's data was likely to mean that first-quarter gross domestic product growth in the US could be upwardly revised.

"The deficit is not getting better, but at least it isn't getting much worse," said Mitul Kotecha, head of global currency research at CALYON.

Part of the US dollar's strength was linked to congressional testimony from US Federal Reserve Chairman Alan Greenspan on Thursday that was widely viewed as indicating the Fed will keep making steady, quarter-point rate hikes.

The euro has been under pressure throughout most of June, following rejections of the proposed EU constitution by French and Dutch voters.

"The post-referendum turmoil and mounting market speculation of an ECB rate cut should push the euro even weaker versus the dollar in the next three months to US$1.17 but thereafter it should stabilize and then very gradually recover," Societe Generale analyst Brian Hilliard said.

"There seems to be a snowball effect with the euro," said IDEAGlobal currencies analyst Sean Callow.

"People are just piling on and selling it because other people are selling it. No one knows where the bottom is. They may be over-shooting with the euro," Callow said.

In late New York trade, the US dollar stood at 1.2680 Swiss francs from SF1.2543 on Thursday.

The pound was being traded at US$1.8123 from US$1.8204 late on Thursday.

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