Euro moves closer to record high vs dollar

April 20, 2007
Updated 11:39:35 (Mla time)

Agence France-Presse

TOKYO -- The euro edged up towards its all-time high against the dollar in Asian trade Friday as the market focused on the Chinese economy and this weekend's French presidential first-round vote, dealers said.

They said market players remained cautious after the yuan rose to fresh highs against the dollar amid concern about faster-than-expected Chinese economic growth.

The euro gained to 1.3617 dollars in Tokyo morning trade from 1.3607 late Thursday in New York, approaching its 2004 record high of 1.3666.
The single European currency rose to 161.54 yen from 161.14 while the dollar climbed to 118.61 yen from 118.50.

"Players are tending to hold the euro as the market became (more) sensitive about China's currency and its economy," said Hironobu Hagi, deputy general manager of Shinsei Bank's capital markets division.

"It may take some time before the euro revisits its record high against the dollar but that is now certainly in many market players' sights," he said.

On Thursday, the yuan rose to 7.7165 to the dollar, its highest level since Beijing relaxed its forex regime in July 2005 after news that China's economy expanded a robust 11.1 percent year-on-year in the first quarter.

The Chinese currency was hands at 7.7217 to the dollar in early Asian trade on Friday, down slightly from Thursday levels.

The United States has long pressured China's authorities to allow the yuan to appreciate more rapidly, arguing that the currency is undervalued, thereby giving Chinese exports an unfair advantage on world markets.

The market was looking ahead to a meeting of eurozone finance ministers in Berlin later Friday amid speculation they may voice growing concerns about the strength of the euro, dealers said.

The outcome of Sunday's first round of voting in the French presidential elections could also influence the outlook for the euro, with rightwing candidate Nicolas Sarkozy tipped to come out in pole position, dealers said.

"The commitment of the winner to far reaching economic reforms should be key to investors," Barclays Capital analyst Laurence Boone wrote in a research note.

"A Sarkozy victory will likely be positive for the euro and is one of the reasons for our bullish view on the currency. By contrast, if he did not win, or if (far-right leader) Jean-Marie Le Pen reached the second round, we think it would be euro-negative," Boone added.

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