NEW YORK (AFP) — The euro firmed against the dollar Thursday despite Germany's official fall into recession and troubling economic signs in the US, while the ailing pound's decline deepened.
The euro traded at 1.2779 dollars around 2200 GMT, up sharply from 1.2505 dollars late Wednesday.
The euro also leapt against the Japanese currency, trading at 124.84 yen against 118.19 Wednesday.
The dollar shot up to 997.67 yen from 94.61.
The euro's rebound followed a US government report that while the US trade deficit narrowed in September, imports showed a record slide, with exports also down sharply.
The data spotlighted weakening economic conditions both in the United States and its trading partners on the eve of a Group of 20 summit of industrialized and emerging nations in Washington aimed at confronting the worst financial crisis since the Great Depression.
Earlier, the euro briefly weakened on news that Germany, the world's third-biggest economy, plunged into recession for the first time in five years, according to official data.
It was the first major economy to confirm that a long-feared recession had arrived, with France, Italy and the entire 15-nation eurozone expected to follow suit on Friday.
In volatile trade, the dollar fell sharply across the majors, said Terri Belkas, analyst at Forex Capital Markets.
"There was no fundamental trigger to the move, but with the financial markets less liquid these days, technical retracements can be sharp and severe," Belkas said.
The analyst predicted volatility "should remain high" Friday with the release of US October retail sales data, "expected to show that the index fell for the fourth month in a row."
The yen gave back some of the previous day's strong gains that were sparked by news that the US government had dropped a plan to buy up toxic mortgage-related assets.
Market watchers said the yen could turn higher again because of falling stock markets and growing worries about the financial crisis.
The yen tends to benefit from market turmoil because it is often sold to fund risky bets, and is seen as a relatively safer shelter for investment.
The British pound meanwhile suffered more against the euro, hitting 1.1824 euros, a low point not seen since 1992, according to Lee Hardman of Bank of Tokyo-Mitsubishi.
In late New York trade, the pound slipped to 1.4842 dollars from 1.4955 dollars late Wednesday.
The dollar stood at 1.1866 Swiss francs, compared with 1.1864.
Copyright © 2009 AFP. All rights reserved. More »
