Euro rebounds against dollar

December 7, 2010
Shares

, LONDON, Dec 7 – The European single currency rebounded against the dollar on Tuesday, but remained under pressure from eurozone debt crisis concerns ahead of the presentation of the Irish government\’s austerity budget.

Amid the economic uncertainty surrounding the eurozone, gold prices hit fresh record highs above 1,428 dollars an ounce.

In morning trade here, the European single currency rose to 1.3382 dollars from 1.3304 dollars in New York late on Monday.

Against the Japanese currency, the dollar dipped to 82.58 yen from 82.67 yen on Monday.

"After yesterday\’s tumble, the euro is back on form," said Kathleen Brooks, an analysts at Forex.com.

"Yesterday\’s decline in the euro was attributed to the disagreement between eurozone ministers about the potential for eurozone-wide bonds to be issued as a way to bring the sovereign debt crisis to an end.

"Italy and Luxembourg are spear-heading the plan, while Germany remains opposed. Peripheral economies\’ bond yields continue to rise today after falling quite significantly last week.

"This suggests that investors remain unconvinced that European lawmakers can bring this crisis to a satisfactory conclusion since there are so many," Brooks added.

EU finance ministers on Tuesday formally adopted Ireland\’s bailout plan, hours before the Irish parliament was to vote on an austerity budget.

Ministers from the 27 European Union nations "adopted the decision concerning aid to Ireland, along with the recommendation setting out the conditions" that Dublin must meet in exchange for financial aid, an EU source said.

Later on Tuesday, Irish finance minister Brian Lenihan will deliver a 2011 budget that will contain a combined 6.0 billion euros (8.0 billion dollars) of taxation hikes and spending cuts.

The statement will be the first in a series of budgets to implement a total fiscal correction of 15 billion euros over the next four years.

The deal with the EU and the International Monetary Fund for 67.5 billion euros in external loans and guarantees, plus 17.5 billion taken mostly from Ireland\’s public pension fund, has angered citizens.

The first transfers will be used to shore up Ireland\’s banking system, battered by the global financial crisis, a property bubble bursting and the deepest recession since the 1930s.

Elsewhere in foreign exchange trade Tuesday, the yen rose to a three-week high against the dollar as speculation about a possible Chinese interest rate hike fuelled demand for the safe-haven Japanese currency, dealers said.

China\’s central bank may raise interest rates around the weekend to combat surging prices, the state-run China Securities Journal cited analysts as saying. November\’s consumer price index is due out on Monday.

Sterling was meanwhile mixed following weak British industrial production data and ahead of the Bank of England\’s latest monetary policy decisions due on Thursday.

In London on Tuesday, the euro changed hands at 1.3382 dollars against 1.3304 dollars late in New York on Monday, at 110.50 yen (109.99), 0.8470 pounds (0.8464) and 1.3073 Swiss francs (1.3063).

The dollar stood at 82.58 yen (82.67) and 0.9768 Swiss francs (0.9817).

The pound was at 1.5798 dollars (1.5711).

On the London Bullion Market, the price of gold climbed to a record high of 1,428.55 dollars an ounce at about 1015 GMT, compared with 1,403.50 dollars late on Monday.

Gold is seen as a safe haven investment, while the precious metal is also viewed by traders as a hedge against inflation.

Shares

Latest Articles

Stock Market

Most Viewed