LONDON, Oct 28: The euro was on a backfoot against the dollar on Monday as a closely watched survey showed a further deterioration in business confidence in Germany, adding to the gloom hanging over the euro-zone’s biggest economy.

The single European currency eased to $0.9740 from 0.9760 late on Friday in New York.

The dollar rose to 124.61 yen from 124.27 on Friday.

The main focus of the day in Europe was the industrial confidence index calculated by the Ifo economics research institute.

Ifo’s business climate index for western Germany fell to 87.7 points in October from 88.2 points in September, roughly in line with expectations.

The German Ifo business climate indicator, EU Commission business and consumer surveys and purchasing managers’ indices for the manufacturing sector all suggest that there is little hope for an improvement in the near-term, said Canadian Imperial Bank of Commerce economist Audrey Childe-Freeman.

The data highlights the fact that the euro zone could do with a rate cut, she added.

However, Childe-Freeman expressed doubts that the European Central Bank would cut interest rates in November owing to recent controversies about the EU Stability and Growth Pact, noting that the ECB had issued a surprise statement defending the pact last week.

The ECB took the highly unusual step of issuing a statement about the troubled stability and growth pact. It will not be willing to cut rates in November in this context of political issues related to the pact, she said.

With growth stalling in Germany, dealers are concerned about where the driver for a euro-area economic recovery will come from.

Also underscoring the difficult times facing Germany, the weekly Der Spiegel reported in its Monday edition that the country would downgrade its growth forecasts for this year and 2003.

It said that Berlin was dropping its growth forecast for 2002 to 0.5 per cent from 0.75 per cent, and now expects the economy to grow 1.5 per cent in 2003 instead of 2.5 per cent.

Wolfgang Clement, the new head of the super-ministry combining economy and labour, is expected to announce the revised forecasts next week, according to experts quoted by the weekly.

M3 is the ECB’s preferred indicator of medium-term inflationary trends.

The euro was changing hands at 0.9740 dollars against 0.9760 late on Friday in New York, 121.39 yen (121.31), 0.6300 pounds (0.6293) and 1.4682 Swiss francs (1.4672).

The dollar was being quoted at 124.61 yen (124.27) and 1.5067 Swiss francs (1.5031).

The pound was at 1.5463 dollars (1.5502), 192.70 yen (192.68) and 2.3306 Swiss francs (2.3307).

On the London Bullion Market, the price of an ounce of gold stood at $313.25 against 311.75 late on Friday. —AFP