Euro gets boost from US consumer confidence

26th September 2009, Comments 0 comments

The euro climbed against the dollar on Friday on the back of rising US consumer confidence even as ministers at the G20 summit stressed the importance of a strong dollar for the world economy.

London - The euro climbed against the dollar on Friday on the back of rising US consumer confidence even as ministers at the G20 summit stressed the importance of a strong dollar for the world economy.

"A strong dollar is very important to the United States," US Treasury Secretary Timothy Geithner said at a meeting with Japanese Finance Minister Hirohisa Fujii on the sidelines of the G20 talks in Pittsburgh.

The yen also rose against both the dollar and the European single currency after Japan's new finance minister said on the sidelines of the summit that Tokyo did not intend to intervene to weaken the Japanese currency.

Fujii, who took office last week after his centre-left party's election win, told Geithner that Japan would stay away from an "intentional" currency policy that would lead to a weaker yen.

The pound also sank to its lowest level against the euro since April after the governor of the Bank of England Mervyn King said on Thursday that the pound's weakness was "very helpful" to the British economy.

Howard Archer, from economic research consultancy IHS Global Insight, said the fall was due to "significant speculation that the Bank of England is happy to see a weaker currency."

Moneycorp said the pound was "proportionally weaker across the board."

The euro was changing hands for USD 1.4692 in London late on Friday compared to USD 1.4654 in New York late on Thursday.

Against the Japanese currency, the euro fell to JPY 132.17 compared to JPY 133.75 previously.

The dollar also fell to JPY 89.95 against JPY 91.26 previously.

The pound dropped to USD 1.0847 and USD 1.5918.

The euro tends to benefit from a perception of greater economic stability since it is seen by traders as a riskier currency and has a higher yield, while the dollar is considered a safe haven asset in tough economic times.

The European currency therefore benefited from a rise in a US consumer confidence index compiled by the University of Michigan which rose by more than expected in September to 73.5 points -- its highest level since January 2008.

Before the consumer confidence reading, the dollar had risen higher after a surprise fall of 2.4 percent in durable goods orders from July to August.

The dollar's volatility "could be a sign that the major bourses have reached a crossroads, and that trading could be mixed going into the early part of next week" said Nick Serff from financial spread betting company City Index.

Stuart Bennett, an analyst at French investment bank Calyon, said the dollar should win some support as many investors become less willing to take risks amid an unconvincing performance on global stock markets.

The G20 leaders were set to say that economic stimulus measures to cope with the global financial crisis should be maintained "until a durable recovery is secured," according to a draft of their joint statement.

In London on Friday, the euro was changing hands at USD 1.4692 against USD 1.4654 late on Thursday, at JPY 132.17 (133.75), GBP 0.9204 (0.9127) and CHF 1.5102 (1.5097).

The dollar stood at JPY 89.95 (91.26) and CHF 1.0278 (1.0300).

The pound was at USD 1.5965 (1.6053).

On the London Bullion Market, the price of gold retreated to USD 991.50 an ounce from USD 1,009.75 an ounce late on Thursday.

AFP/Expatica

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