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Dollar falls on inflation concerns; European rates
Published in Saudi Press Agency on 10 - 07 - 2007


The dollar slumped against major currencies
Tuesday with the euro surging to an all-time highs on optimism about
the outlook for the European economy and concerns about growth in the
United States, according to dpa.
While the euro jumped to a record 1.3735 dollars during afternoon
trading in Europe, the pound hit a 26-year high of 2.0231 dollars.
The greenback also edged down to 122.38 yen. The euro was at
1.3722 dollars as European trading came to an end Tuesday.
The euro's rise against the dollar came amid concerns about the US
economy as a result of an upheaval in its housing market, falling
productivity, the nation's trade deficit and renewed inflationary
pressures.
The common currency's previous record of 1.3682 dollars was set in
April this year. Since then, economic data has continued to point to
the 13-member eurozone remaining on a growth track and shaking off
slowing US economic growth.
While the Fed left borrowing costs unchanged last month at 5.25
per cent, the European Central Bank appeared to prepare the ground at
its meeting last week to deliver another rate hike in September,
which would lift the ECB's benchmark refinancing rate to 4.25 per
cent.
This would represent the ECB's ninth rate rise since the bank
launched its current rate-hiking cycle in December 2005.
"The area is at the moment the only one of the major economic
regions of the world where a rate rise is not expected," said Carsten
Fritsch, currency analyst with Commerzbank AG.
At the same time, strong UK retail sales data have added to
expectations that the Bank of England will press on with raising
rates after announcing last week that it was raising rates in
Europe's second biggest economy to 5.75 per cent.
The ECB's signal last week that it was considering another rate
increase in September after raising the cost of money by 25 basis
points in June sent the euro up to an all-time high against the yen
of 167.38.
However, the euro's climb has also helped to rattle investors
concerned about the impact of the currency's rise on the 13-member's
key export machine. By late afternoon trading Tuesday the pan-
Eurostoxx50 index was down 1.2 per cent.
After making its debut on world forex markets at 1.18 dollars in
January 1999, the euro dropped about 25 per cent over the following
18 months or more as concerns set in about the currency bloc's
economic outlook and as Europe's political leaders battled to reach
consensus on reform.
The common currency hit a record low of 0.8252 US cents in October
2000. Euro notes and coins were introduced in January 2002.


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