LONDON, Aug 23: The dollar edged up against the euro here on Tuesday as the single European currency was unable to take full advantage of a marked improvement in German business confidence.

The euro in late day trade was at $1.2215 against $1.2226 late Monday in New York.

The dollar was meanwhile trading at 109.88 yen after 109.69 on Monday.

“The majors are in light trading ranges with real money investors still on holiday,” said Neil Mackinnon, chief economist at ECU Group.

The economic pick-up identified in the closely-watched ZEW confidence survey in Germany was not enough for the market to establish new trading ranges and traders soon took profits after the euro rose at one point to $1.2250.

Nevertheless the survey from the ZEW Institute solidified expectations that the eurozone’s largest economy is on an upward growth path.

The institute’s economic expectations index, based on a poll of 294 analysts and institutional investors, rose by 13 points to plus 50.0 points in August, against expectations of a more modest rise to 38.0.

A similarly strong picture is expected to emerge in the more closely monitored IFO survey on Germany, due out on Thursday, although once again analysts doubt that the euro will benefit too much in the current holiday mode.

The US Federal Reserve is widely seen nudging its target lending rate from 3.50 per cent to four or 4.25 per cent by year-end. That compares to the 2.00 per cent level at which rates have been held at since June 2003 in the eurozone.

The dollar was in the doldrums for much of the last couple of years, due to concerns over the financing of the US budget and current account deficits. But the greenback surged to 10-month highs in early July following political crises engulfing the EU as well as a greater emphasis on developments related to yield differentials.

Meanwhile, the yen was on the back foot on a combination of higher oil prices and a growing sense in the market that the likely re-election of Japanese premier Junichiro Koizumi has been largely priced in.

On the London Bullion Market, the price of an ounce of gold stood at $439.35 against $439.65 late on Monday.—AFP