Dollar hits three-month high against the euro

THE US dollar hit a three-month high against the euro yesterday following encouraging comments from US Federal Reserve chairman Alan Greenspan.

The increase to $1.2825 occurred despite weaker than expected unemployment data in the US last Friday.

According to Head of Domestic Sales, Bank of Ireland Global Markets John Moclair the primary reason for this strength were comments from Fed chairman Mr Greenspan in which he said that there were forces at play that would help the growing US trade gap to correct itself.

“In addition, Mr Greenspan appeared to offer hope that the US would take more meaningful steps to address the US fiscal deficit. The comment on the trade deficit seems to reflect a shift by Mr Greenspan from the comments he made late last year in which he expressed concern about the trade deficit and the ability of the US to fund it.”

The trade gap has been one of the main drivers behind the dollar decline in 2004. Since the start of this year, it has recovered by over 6%. Commentators see the $1.2825 area as offering key support for the rate, with the widely held view being that a move below $1.2825 will open up the real possibility of a decline to the $1.2400 area, he said.

“This type of movement would be most welcome by Irish exporters and help them to redress some of the problems caused by the dollars 18% decline in 2004.