LONDON, Nov 30: The dollar firmed against the euro on Friday on renewed optimism about the outlook for the US economy which outweighed the prospect of a reduction in US interest rates.
The single European currency in late-day trade was at $1.4692 after $1.4742 late Thursday in New York.
The dollar was meanwhile trading at 111.08 yen, up from 109.88 on Thursday.
Gains in equity prices, with Wall Street well inside positive territory, helped boost the greenback, as did the publication of an index measuring manufacturing activity in the Chicago area.
The index in November rose to 52.9 points from 49.7 in October, with analysts having expected a reading of 50.5.
US rate cuts are also expected to keep the economy from slipping into a recession and are seen by some as a positive for the dollar just now. A fall in US interest rates would normally weaken the currency.
Speaking on Thursday, Federal Reserve Chairman Ben Bernanke signalled more openness to cutting rates again on December 11, although he stressed this would depend on upcoming data.
Fed policymakers will need to be “exceptionally alert and flexible” given the risks to consumer spending and the economy, Bernanke said in a speech.
At The Bank of Tokyo-Mitsubishi in London analyst Lee Hardman said “the recent rally in the dollar has been undermined by increased speculation that the (Federal Reserve) will ease its monetary stance in December, as investors begin to refocus on narrowing US interest rate differentials.”
He noted that the European Central Bank (ECB), by contrast, was facing evidence of increasing inflationary pressure rather than a slowdown in economic activity.
“The ECB has anticipated a hump in inflation in the near-term, but the extent of inflation pressure will be a concern.
“In these circumstances the ECB is likely to remain on hold for the foreseeable future, maintaining hawkish rhetoric on inflation.”
Inflation in the 13 nations sharing the euro came to 3.0 per cent in November, its highest level for more than six years and well above the European Central Bank’s preferred level, official EU data showed on Friday.—AFP