LONDON, Sept 23: The euro drifted higher against the dollar on Monday as dealers mulled a razor-thin victory by Chancellor Gerhard Schroeder’s ruling Social Democrats in the German national election, though analysts said the result was mildly negative for the single European currency.

The single European currency rose to 0.9855 dollars from 0.9820 late on Friday in New York.

The dollar eased to 123.21 yen from 123.35 on Friday.

Analysts said the euro’s gains did not seem to have been prompted by Schroeder’s victory, which appears to herald four more years of existing policies and no immediate prospect of economic reforms.

If anything Schroeder’s win is slightly negative because the small majority could mean difficulty in pushing through structural reform, said Monica Fan at Bank of America.

Dealers were also looking ahead to the interest rate decision of the US Federal Reserve on Tuesday, though most economists expected the central bank to hold its main lending rate steady at 1.75 per cent.

The euro was changing hands at $0.9855 against 0.9820 late on Friday in New York, 121.26 yen from 121.16, 0.6326 pounds (0.6315) and 1.4637 Swiss francs (1.4660).

The dollar was being quoted at 123.21 yen (123.35) and 1.4855 Swiss francs (1.4925).

The pound was at 1.5566 dollars (1.5544), 191.66 yen (191.79) and 2.3137 Swiss francs (2.3205).

On the London bullion market, the price of an ounce of gold rose to $323.35 from 322.30 late on Friday.—AFP