Highest Euro Rate Towards Dollar in 2 Years

Euro currency exchange rate reached its highest level in relation to dollar on world markets last week in the past two years.

Euro currency exchange rate reached its highest level in relation to dollar on world markets last week in the past two years, realising another record value in relation to yen and the Swiss frank because investors are expecting the European Central Bank (ECB) to raise key interest rates by the end of the second quarter.

Euro firmed in relation to dollar 1.3 percent to 1,3529 dollars, the highest level in the past two years. The single European currency noted a new record towards yen, of 161.5 yen and towards the Swiss frank, of 1,6452franks fro a euro.

At the same time, the dollar strengthened 1.2 percent towards yen, and it was traded 119.2 yen for a dollar, towards the highest level in the past six weeks of 119.55 yen. It strengthened 0.9 percent in relation to the British pound, to 1,9863 dollars for a pound. The Swiss frank expensified a slight 0.07 percent to 1,2146 franks for a dollar.

Currency investors are optimistic about the economic growth in the Eurozone. They expect the ECB to raise key interest rates again in June after keeping them at the present level of 3.75 percent. ECB president Jean- Claude Trichet announced at a press conference that the bank will follow price movements “very carefully”, which was interpreted as a signal of raising key interest rates in June.

-After Trichet`s press conference on Thursday everyone is convinced that the ECB will raise key interest rates again in June, and possibly again in the second half of the year, which means that the environment continues to stimulate euro strengthening- concluded Niels Christensen of the Copenhagen Nordea. Higher interest rates in the Eurozone make the dollar assets less profitable for investors.

Dollar had a limited response to the announcement of the official notes from the meeting of the American Central Bank Fed, which stated the conviction of monetary heads that the restraining of monetary pressures might demand a repeated increase of key interest rates in the USA, from the current level of 5.245 percent.

-A weak response reflects the market`s inclination to persist in the middle-term prognosis on dollar`s weakening – Kendrick stated.

American currency weakened in relation to other currencies with higher productivity, recording, among other things, the lowest rate towards the Australian name-sake in the past 16 years, of 1.2139 Australian dollars for an American one and the lowest level towards the New Zealand dollar in the past two years, of 1.3757 New Zealand dollars from an American dollar, all under the influence of increased trade tensions between the USA and China.

Furthermore, upon returning from Easter holidays, traders headed into a wave of American currency sale, after Beijing condemned Washington’s announcement of starting a law-suit against China before the WTO due to unsuccessful attempts to restrain boot-legging and counterfeiting products from the USA, warning that this move might seriously harm the co-operation between these two countries.

-Statements from China only increased fears that China might decrease the purchase of American state bonds, which would make USA`s financing of foreign deficit significantly harder- the Royal Bank of Canada warned.

The Swiss frank also slipped to the record low level in relation to euro seeing how Switzerland is only lagging behind Japan in a group of developed industrial countries, when it comes to the low level of key interest rates. These amount to 2.25 percent only in Switzerland.