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Dollar hurt by strong eurozone growth

Dollar hurt by strong eurozone growth
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First Published: Wed, Feb 14 2007. 04 31 PM IST
Updated: Wed, Feb 14 2007. 04 31 PM IST
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NEW YORK: The dollar traded mostly lower against its main rivals Tuesday on news of robust eurozone growth and a sharper than expected widening in the US trade deficit in December.
The euro fetched 1.3037 dollars at 2200 GMT, against 1.2963 late Monday in New York.
The dollar was meanwhile trading at 121.11 yen, down from 121.91 on Monday.
The euro experienced a broad-based rally after strong figures on gross domestic product (GDP) growth and a rise in the German ZEW expectations indicator were reported.
Fourth-quarter eurozone growth came to 0.9 percent from the third quarter, above market consensus for a gain of 0.5 percent.
In Germany, the ZEW economic expectations index rose for the third month in a row to 2.9 in February from minus 3.6 in January. Although below an expected improvement to 9.0, the ZEW report said the index would keep rising in March.
“Fourth-quarter GDP figures confirm that the eurozone economy ended last year with plenty of momentum, while the continued strength of forward-looking indicators like the German ZEW survey suggest that growth is likely to remain solid in 2007,” said Jennifer Upham at Capital Economics.
The euro extended gains against the dollar after data showed the US trade deficit widened to 61.2 billion dollars in December from 58.1 billion dollars in November. It was the highest monthly total since September’s 64.4 billion and eclipsed market expectations of 59.5 billion dollars.
Analysts said the shortfall could prompt a lowering in the US economic growth figure in the fourth quarter, which according to the first estimate came to 3.5 percent.
A weakening economy could discourage the US Federal Reserve from raising interest rates and thereby making the dollar more attractive.
US Federal Reserve Chairman Ben Bernanke is to give his semi-annual monetary policy report to Congress on Wednesday. Analysts expect him to be slightly more upbeat about the US economy and to maintain his monetary tightening bias.
Analysts said the markets will be watching to see if Bernanke highlights the “soft landing” scenario for the economy or echoes some of the comments of his central bank colleagues on inflation concerns.
“Given the recent verbiage coming out of the Fed minutes, it will be interesting to see how the chairman positions inflation concerns alongside of often tepid and inconsistent economic data,” said Garry Duncan at PNC Bank.
“Suffice to say that the markets will be closely monitoring each of the chairman’s two days of testimony.”
In late New York trade, the dollar stood at 1.2467 Swiss francs after 1.2535 Monday.
The pound was being traded at 1.9464 dollars, from 1.9475 on Monday.
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First Published: Wed, Feb 14 2007. 04 31 PM IST
More Topics: International News | Europe |