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Tuesday 02nd of December 2008
June 26, 2006

Euro strengthens on rate hike talk


by Elaine Frei

The euro strengthened on Monday amid comments from European Central Bank officials that seem to indicate that interest rates could be hiked again sooner than expected and by more than most analysts have forecast. Also helping the shared currency higher was a rumor that Abu Dahbi could convert up to 10 percent of its currency reserves into euros.

By the middle of the session in New York, the European currency added 0.3 percent against the US dollar and against sterling, to $1.2550 and £0.6900 respectively. The euro was also up 0.1 percent versus the Japanese yen to ¥146.00, near an all-time high.

After gains on Friday, the US dollar weakened on Monday, dropping 0.2 percent in relation to both the yen and the Swiss franc, to ¥116.30 and SFr1.2465. The trigger for Friday’s gains, rumors that the Federal Reserve could raise interest rates by as much as 50 basis points this month, were dismissed by most analysts, who cited signs of a slowing economy and a plentiful supply of new houses that will likely lead to lower house prices as arguments against an outsized rate hike.

Meanwhile, the Turkish lira added 2.3 percent versus the greenback, to TL1.6690 as the Central Bank of Turkey sold dollars a day after hiking interest rates by 225 basis points to 17.25 percent.

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