Euro hits another all-time high against U.S. dollar, reaches $1.3920

Euro hits another all-time high against U.S. dollar, reaches $1.3920


Berlin: The euro edged up to another all-time high against the dollar on 13 September, hitting $1.3920 amid persistent speculation about a US interest rate cut and worries about turbulence in financial markets.

In morning European trading, the 13-nation broke through the previous record of $1.3914 it reached on 12 September. Late on 12 September in New York, it bought $1.3908.

The euro surged against the dollar on 12 September after Treasury secretary Henry Paulson, speaking to officials from some of the biggest financial firms in the US, said volatility in financial markets will take some time to be resolved, particularly in the area of subprime mortgages.

Those worries and disappointing US jobs data last week have fed speculation that the Fed will cut interest rates by as much as half a percentage point when it meets next week.

Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors lower returns on investments denominated in the currency. While it has put its own two-year run of gradual interest rate increases on hold, the European Central Bank has left many economists expecting another rise by the end of the year.

ECB governing council member Yves Mersch wrote in a report published on 13 September that risks to euro-zone medium-term price stability persist and promised that the bank will act “in a firm and timely manner" to counter these risks.

“The orientation of the ECB’s monetary policy remains accommodative," said Mersch, the governor of Luxembourg’s central bank adding that the ECB “may resume tightening," depending on the analysis of new data.

“Prudence, prudence, prudence is necessary in the current climate," he said. In other trading on 13 September, the British pound fell to $2.0256 from $2.0302, while the dollar climbed to 114.47 Japanese yen from 114.26 yen.