NEW YORK, April 21: The dollar firmed slightly against other currencies on Friday but remained close to its all-time low against the euro and 26-year lows against sterling as traders consolidated ahead of the weekend.
Analysts said traders would await fresh data on economic momentum in the United States in the coming week, which would offer further clues on the directions of interest rates.
The euro fetched 1.3590 dollars at 2100 GMT from 1.3609 late Thursday, after flirting with its historic record of 1.3666 dollars set on December 30, 2004. It had risen as high of 1.3637 dollars in trading Friday.
The dollar was changing hands at 118.66 yen, against 118.50 yen on Thursday.
Sterling meanwhile edged
lower to $2.0026 after 2.0032 a day earlier, near its highest level against the dollar since 1981.
Scotiabank analyst Camilla Sutton said that after the greenback fell 0.6 per cent in the past week against a basket of other currencies, many are expecting further weakness in response to a softening economic picture.
Data last week continued to support our view that the US economy is weakening, she said in a note to clients.
In the face of this situation, she said, Our view continues to be that the Fed (Federal Reserve) will be forced to cut rates twice in 2007, whereas the market expects one cut in 2007.The surging euro meanwhile has led to some angst in the eurozone among officials who worry that a high currency will hurt exports and the region's fragile recovery.
In Berlin, finance ministers from the 13-nation eurozone shrugged off the surging strength of the euro.
The growth situation in our area is improving, is robust, is broadening, said Luxembourg Prime Minister Jean-Claude Juncker after chairing a meeting of eurozone finance ministers and central bankers in Berlin.
However ECB president Jean-Claude Trichet reiterated that excessive exchange rate volatility is undesirable.The prospect of rising interest rates in the eurozone has propelled the euro higher against other major currencies as many investors borrow in low interest rate currencies for higher-yielding euro-denominated investments.
Many investors are switching away from the dollar because American borrowing costs appeared to be heading lower, dealers said.
Owing to strengthening European economies, particularly in Germany, analysts believe the European Central Bank will likely raise rates soon from the current level of 3.75 per cent. In contrast, many market watchers reckon the US Federal Reserve will cut rates from the current 5.25 per cent.
As long as the ECB needs to hike interest rates euro-bearish comments will only have a minor impact, analysts at BNP Paribas told Thomson Financial's AFX newswire.
The eurozone will have to succeed in world markets in an environment where some of its fast growing customers will slow: China, Opec and the US, he said.—AFP