Tuesday March 11, 2008 - 12:17:11 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Data lifts euro to new record highs vs dollar
(Recasts with ZEW, Weber, changes byline)
By Simon Falush
LONDON, March 11 (Reuters) - The euro surged to an all-time
high against a struggling dollar on Tuesday as strong economic
data and hawkish talk from European policymakers on inflation
reduced expectations of rate cuts from the European Central Bank.
German investor morale unexpectedly improved in March,
showing that Europe's largest economy made a solid start to the
year, the ZEW research institute said. Click on [ID:nL11232845].
However, price pressures leave no room for interest rate
cuts, said Bundesbank President and ECB Governing Council member
Axel Weber, as German inflation is a cause for concern and might
remain high throughout 2008. [ID:nFAT004010].
"Weber's comments on price pressures mean that rate cuts are
off the agenda. His comments were very hawkish giving investors
the excuse to push the euro higher and sell the dollar," said
Daragh Maher, senior currency strategist at Calyon.
By 1142 GMT the euro had touched $1.5495, its highest since
its inception in 1999, up nearly 1 percent on the day and over
six percent since the start of the year <EUR=>.
Growing inflationary pressure in the euro zone has led
futures markets to cut expectations on the extent of monetary
easing likely from the ECB by year-end to just 50 basis points.
While the focus in the euro zone remains on inflation, in
the United States policymakers are concentrating on how to deal
with economic slowdown.
U.S. Deputy Treasury Secretary Robert Kimmitt told CNBC
risks to U.S. economic growth were on the downside and the
economy faced headwinds from the housing market, credit markets
and commodity prices [ID:nL11813629].
The dollar was close to an all-time low versus the Swiss
franc <CHF=> and fell versus the pound <GBP=>, though it was up
0.4 percent versus a yen dented by rising equity markets and a
slight return of risk appetite <JPY=>.
The yen also fell on continued uncertainty about who will
take the post of Governor of the Bank of Japan. The row over
whether Toshiro Muto should head the Bank of Japan raises the
risk of a monetary policy vacuum. Click on [ID:nT213867].
Speculation that the U.S. Federal Reserve might lower
interest rates from the current 3 percent before its scheduled
meeting on March 18 has led to further dollar selling.
U.S. interest rate futures are now fully pricing in a 75
basis points of easing by the Fed this month and around a 10
percent implied chance for rates to be lowered by 100 basis
Rising inflation continued to be reflected in U.S. crude oil
prices, which stayed close to a record high above $109 a barrel
The euro's steady rise will put the spotlight on speeches by
U.S. Treasury Secretary Henry Paulson later in the session.
"He is clearly being goaded into saying something by (ECB
President Jean-Claude) Trichet who continues to note the U.S.
adherence to the `strong dollar policy'," notes Bear Stearns.
"The key issue here is whether Paulson merely re-states that
a strong dollar is in the U.S. interests or whether he tries to
sound a bit more threatening."
(Editing by Ian Jones)
journalists are subject to the Reuters Editorial Handbook which
requires fair presentation and disclosure of relevant intere
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."