043007: Euro hits record high against US dollar, yen

 

 

By ISABELLE LINDENMAYER NEW YORK (AP) — Friday was a day of record highs for the euro as it finally burst through its all-time high against the dollar, setting a record at $ 1.3682 and logging a new high against the yen. Yet the single currency was unable to sustain its long-awaited move against the dollar as the market seemed unwilling to buy the euro at its new level. Indeed, after cruising up to its new high on news that US gross domestic product rose at a rate of only 1.3 percent in the first quarter versus an expected rate of 1.8 percent, the single currency quickly retreated back under the $ 1.3670 mark, only to tumble lower as investors realized the move would not stick and engaged in a bout of profit-taking. As a result, the euro ended the session modestly higher against the dollar, while the greenback was able to finish the week only slightly lower against the yen thanks to its midmorning rally. The euro did, however, managed to hold onto its gains against the yen, breaking through a set of new all-time highs and setting a fresh record at 163.25 yen. Late in New York, the euro was trading at $ 1.3649 from $ 1.3603 late Thursday, while the dollar was at 119.50 yen versus 119.61, according to EBS. The euro was at 163.08 yen from 162.68 late Thursday. The dollar was at 1.2053 Swiss francs from 1.2082, while the UK pound was at $ 1.9980 from $ 1.9911 late Thursday. The surge in the euro to a record high against the dollar should be a boon to eurozone consumers, who are likely to see their purchasing power enhanced, and a burden to exporters trying to compete on the world stage. A strong euro tends to hold down the price of imported goods, notably of oil and gas imports denominated in dollars, but also of consumer items such as Chinese T-shirts and Asian electronic goods. Eurozone businesses benefit from lower prices for essential materials bought outside the zone. A company such as French group Vivarte, for example, which imports textile products from South America and Asia for sale in Europe, would look favorably on a rising euro. A strong currency, by making imports cheaper, also helps tame inflation and — in principle — should hold down interest rates. While the European Central Bank is expected to raise eurozone borrowing costs a quarter of a point to 4.0 percent in June, their level would still be well below the 5.25 percent benchmark rate in the United States. But on the other hand a rapidly appreciating euro would make eurozone products more expensive and less competitive on overseas markets and as such could threaten the eurzone’s nascent economic rebound.

 

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