Euro roars to record high 1.4120 dollars
LONDON (AFP) — The euro raced to an all-time high of 1.4120 dollars on Friday as the US currency came under heavy selling pressure on expectations of further interest rate cuts in the United States.
The European single currency leapt past 1.41 dollars for the first time since its creation in 1999 following a Federal Reserve warning that US mortgage market woes could worsen.
The euro later pulled back to stand at 1.4074 dollars, which compared with 1.4065 dollars in New York late on Thursday.
"The expectation of bigger interest rates cuts in the US relative to other countries, as a result of intensifying concerns about the US economy, are weighing heavily on the currency," said Calyon analyst Mitul Kotecha.
He added that the European single currency "looks set to push even higher over the short-term."
The dollar has taken a pounding since the Fed slashed its benchmark rates on Tuesday by half a percentage point to 4.75 percent. The European Central Bank's key rate stands at 4.00 percent.
There are lingering concerns about whether the deep US rate cut will succeed in easing the credit squeeze, dealers said.
"Appetite for the dollar is weakening due to receding hopes that rate cuts can resolve the credit crunch," said Daisuke Uno, strategist at Sumitomo Mitsui Banking Corp.
Fed chairman Ben Bernanke said Thursday in Congressional testimony that the US economy and markets had reacted to a wave of foreclosures in the US subprime, or high-risk, mortgage sector in a manner that has "far exceeded even the most pessimistic estimates."
He also warned that the worst of the mortgage maelstrom was not yet over, as more homeowners face difficulties making payments on adjustable rate mortgages that are being reset with higher interest rates.
"It is all about dollar weakness and euro strength this morning again, with euro/dollar touching a new record high of 1.4120," said Audrey Childe-Freeman, economist with the Canadian Imperial Bank of Commerce in London.
"This will surely raise concern among eurozone exporters, expect verbal intervention to resurface too (particularly from the French authorities) but that could be in vain."
French officials complain that a tight ECB monetary stance drives up the value of the euro and thereby dampens eurozone exports and growth.
Elsewhere, the yuan finished Friday at a record high of 7.5036 yuan to the dollar. However, the pace of its appreciation remains a major source of friction between the United States and China, with Washington accusing Beijing of keeping the currency purposefully low to give its exporters an unfair advantage.
In Friday trading, the euro was changing hands at 1.4074 dollars, against 1.4065 dollars late on Thursday, 162.35 yen (161.25), 0.6987 pounds (0.7003) and 1.6521 Swiss francs (1.6489).
The dollar stood at 115.37 yen (114.63) and 1.1740 Swiss francs (1.1722).
The pound was being traded at 2.0246 dollars (2.0079).
