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Sun, Nov 02, 2008 - Page 10 News List

Euro weakens on brighter US prospects

AFP , NEW YORK

The euro weakened against the US dollar on Friday, with investors betting the US economy will get back on track faster than the eurozone amid global turmoil.

The euro was at US$1.2757 around 7pm GMT, compared with US$1.2913 late on Thursday.

Foreign exchange dealers said the dollar recovered quickly from mid-week losses after the US Federal Reserve slashed its key interest rate half a point on Wednesday to a historic low 1 percent.

Despite the US being the worst affected by the financial crisis, with several major banks collapsing, the US economy is the biggest and most resilient in the world, they said.

Investors thus feel the safer course in the longer term is to hold the dollar and US assets in the belief that recovery, however long it takes, will occur there first.

The dollar also got a boost from technical factors, dealers said, with the end of the month a time for settling accounts and fund managers likely looking to cover positions.

“Everyone wants to know how long the global recession will last, but with financial markets gyrating dramatically on a daily basis, this question is still largely unanswerable,” Dario Perkins of ABN Amro said.

Other analysts noted concern about stresses in the eurozone as the financial crisis bites deeper while eastern Europe is already under pressure — Ukraine and Hungary both having sought help from the IMF.

As the week drew to a close, markets were shifting attention to Europe, where the European Central Bank and the Bank of England are expected to cut their rates in the week ahead.

In New York trading, the dollar stood at 1.1549 Swiss francs, up from SF1.1430 late on Thursday.

The pound was at US$1.6139, down from US$1.6399.

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