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Sterling gains on euro after new data

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by Elaine Frei

The US dollar strengthened on Wednesday on the news that retail sales were up 1 percent in November. This was taken as a welcome sign that the US economy is not slowing as much as it has seemed from some recent data. It was also welcome news after comments from the Federal Reserve yesterday that mentioned a much-slower housing market which accompanied the Fed’s decision to leave interest rates at 5.25 percent for the time being even as it said that there was still some risk of inflation.

At mid-afternoon in New York the greenback was 0.3 percent higher in relation to sterling, to $1.9650, while it had added 0.4 percent versus the yen to ¥117.30 and had gained 0.5 percent against the euro to $1.3215.

The yen was weaker again, hitting another record low in relation to the euro and finding eight-year lows versus both the Swiss franc and sterling. Analysts said that the new declines were due to a reduced likelihood that the Bank of Japan will hike interest rates when it meets next week. The declining chance of a rate hike is largely due to remarks from a Japanese government official who said that last week’s revision of the third-quarter GDP growth rate, from 2 percent to 0.8 percent could have an effect on the Bank’s actions.

The yen traded at ¥230.98 against sterling, at ¥97.54 versus the Swiss franc, and was down to ¥155.46 in relation to the euro.

Meanwhile, sterling added 0.2 percent versus the euro to £0.6724 after new data showed that unemployment was down a bit in November when it had been expected to rise slightly. In addition, average earnings were up slightly more than had been predicted.

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News posted: December 13, 2006

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