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Euro tops US$1.40 mark, solidifies role in markets

The euro soared to its highest level ever against the US dollar yesterday, trading above US$1.40 for the first time since the currency was introduced in 1999.

The 13-nation euro bought as much as US$1.4064 in morning trading in Europe before falling back slightly to US$1.4054, above its previous high on Wednesday night of US$1.3987, and more than the US$1.3964 it bought in late New York trading.

Breaking the US$1.40 barrier has long been viewed by analysts, and markets, as a key turning point in solidifying the euro's position in global currency markets and will provide more impetus for its competition as the currency of choice, a position long held by the now weakening dollar.

The rising euro has yet to cause great consternation among most of the 13 nations that use the common currency, but as it rises, it could dampen exports, particularly to the US, making anything from automobiles to consumer appliances more expensive to US buyers.

The latest series of record increases came in the aftermath of a decision by the US Federal Reserve to lower its key interest rate to 4.75 percent from 5.25 percent, as it tries to keep the US economy on track despite market turbulence from the subprime lending crisis.

Most analysts had expected a quarter-point cut. Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors less return on investments denominated in the currency.

The US dollar also fell against other currencies, dipping against the British pound to US$2.0069 compared with US$2.0025 in trading late on Wednesday and slipping against the Japanese currency to ?115.44 from ?116.09 late on Wednesday.
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