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Euro hits new high
Published in Saudi Press Agency on 20 - 09 - 2007

The euro soared to its highest level ever against the U.S. dollar on Thursday, trading
above US$1.40 for the first time since the currency was
introduced in 1999, according to AP.
Breaking that barrier has long been viewed by analysts and
markets as a key turning point in solidifying the euro's
position in global currency markets, and will provide more
impetus for it to be the reserve currency of choice _ a
position long held by the now-weakening U.S. dollar which
has been battered by a recent half-percent cut in U.S.
interest rates.
The 13-nation euro bought as much as US$1.4064 in morning
trading in Europe before falling back slightly to
US$1.4046, above its previous high Wednesday night of
US$1.3987, and more than the US$1.3964 it bought in late
New York trading.
David Jones, chief market analyst at CMC Markets in
London, said the euro's rise is not likely to abate in the
coming days, given fears about another interest rate
increase in the United States.
In Washington, Federal Reserve Chairman Ben Bernanke told
U.S. Congress that the credit crisis had created
«significant market stress» and offered fresh assurances
that regulators would take steps to curb fallout related to
the mortgage mess.
Bernanke made the statement in testimony prepared for a
hearing Thursday before the House Financial Services
Committee.
In his prepared testimony, Bernanke did not offer new
clues about the Fed's next move on interest rates.
«I am sure we're going to see buyers moving in for the
next target,» Jones said, adding that he believes the euro
will rise to US$1.42 very soon.
«If not this week, it could be next week,» he said.
«People are using any weakness as a buying opportunity for
euros.»
Howard Archer, chief U.K. and European economist at Global
Insight, said «US$1.45 is a serious possibility before the
end of the year» because of the specter of more U.S.
interest rate cuts.
«The Fed seems highly likely to cut U.S rates further, it
now looks probable that the next move in U.K. interest
rates will be down, while the ECB currently still retains a
tightening bias,» he said.
The euro's latest surge has come after the Fed lowered its
key interest rate to 4.75 percent from 5.25 percent as it
tries to keep the U.S. economy on track despite market
turbulence from the subprime lending crisis. Most analysts
had expected a quarter-point cut.
Lower interest rates, while used to jump-start the
economy, can also weaken a currency by giving investors
less return on investments denominated in the currency.
The European Central Bank kept its key rate unchanged at 4
percent earlier this month, backing off a planned increase
in light of the subprime crisis and market volatility.
Analysts are mixed on whether the bank will lift the rate
in October.
The Bank of England meets next month, too, and is expected
to keep its rate unchanged at 5.75 percent.
The rising euro has yet to cause great consternation among
most of the 13 nations that use the common currency, save
for France, which has criticized its increase. As the euro
rises it could dampen exports, particularly to the United
States, making European-made products from automobiles to
consumer appliances more expensive for American buyers.
On Thursday, Germany's finance ministry said the euro's
strength meant that export growth in Europe's biggest
economy had lost some of its vigor.
«The dynamism of exports is noticeably weaker than last
year,» the ministry said in its September monthly
bulletin, citing the euro's appreciation against the dollar
as a reason.
The dollar also fell against other currencies, too, and
reached parity with the Canadian dollar for the first time
since November 1976, with US$1 buying 1 Canadian dollar.
The dollar also fell against other currencies, dipping
against the British pound to US$2.0082 compared with
US$2.0025 late Wednesday, after U.K. retail sales in August
rose by 0.6 percent from July.
The dollar slipped against the Japanese currency to 114.96
yen from 116.09 late Wednesday.


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