Euro sensitive to interest rate plans

The euro remained very sensitive on Tuesday to talk that the European Central Bank might cut interest rates soon.

Speculation that this might be so was only increased by today’s move by Riksbank in Sweden to cut interest rates there. ECB officials, however, continue to insist that the current rate of 2 percent is “appropriate” and that no moves in the interest rate, either up or down, are being contemplated.

The euro was down 0.9 percent to ¥131.70 in relation to the yen. It lost 0.2 percent against sterling, down to £0.6640, and declined 0.1 percent to $1.2137 in relation to the US dollar.

On the action by Riksbank to cut interest rates to 1.5 percent, as well as on its lowering of its economic growth prediction for 2005 to 1.9 percent, down from a previous forecast of 3.2 percent, the Swedish krona lost 0.1 percent in relation to the Norwegian krone, to SKr1.1756.

The yen was stronger, rising 0.8 percent to ¥108.43 in relation to the US dollar, and it gained 0.7 percent in relation to sterling, to ¥198.14.

The Canadian dollar was up 0.4 percent to C$1.2297 in relation to the US dollar as Canadian retail sales rose 1.5 percent in April compared to the same month last year. This was better than the 0.6 percent gain that had been expected.

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