Euro strikes record high in brief rise
There was little news to turn investors’ focus away from their worries about the burden of the US current account deficit on the dollar and about the ability of the US economy to attract enough money to plug this shortfall.
Trading volumes were also thin in the holiday period between Christmas and New Year.
“The euro has been strong for a few days now. It is a repeat of late 2002 and late 2003,” said Trevor Dinmore, foreign exchange strategist at Deutsche Bank in London.
“When you have low liquidity at the end of the year, you have fewer flows and you see more dollar weakness.”
The euro hit a record high of $1.3646 before paring its gains to trade at $1.3606.
It also strengthened against the British pound to reach its highest level in more than one year at 70.89 pence.
Against the yen, the euro traded at 140.80 yen, just below last year’s record high around 140.90 yen.
The Swiss franc briefly lost some ground after Switzerland’s leading KOF indicator fell much more than expected in December, hitting 0.49, which compared with expectations for a 0.68 reading.
The franc moved away from levels near this month’s nine-year high against the dollar.
It traded at 1.1332 francs per dollar, compared with 1.1294 in early December.
Global investors’ worries about the US current account deficit have depressed the dollar by some four per cent against the yen and eight per cent versus both the euro and the British pound so far this year.
Many analysts predict further losses if markets continue to question the future ability of the US economy to attract enough foreign funds to plug its external deficit.
“The market has no interest in trying to buy dollars ... there are also not too many people actively dealing now,” said Paul Mackel, currency strategist at ABN AMRO in London.
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