Finance Markets

December 19, 2006

Euro, sterling strengthen on session

Permalink: Euro, sterling strengthen on session

Filed under: Forex, USD, GBP, Euro, Economy, Yen

A new Ifo survey of business confidence in German sent the euro higher versus both the US dollar and the yen. The Ifo index was at 108.7 in December, up from 106.8 in November and despite a prediction that the December figures would be same as the previous month’s. Analysts said that they increase meant that the German economy is in a better position to tolerate a scheduled rise in the Value Added Tax and increases the odds of new hikes in interest rates in the Eurozone.

While the greenback gained back some of its losses to the euro for a short time due to new figures showing that wholesale prices were up substantially in November, when it became clear that most of that increase was due to higher prices for cars and trucks the rally ended. At mid-afternoon in New York, the euro was 0.6 percent higher in relation to the US currency to $1.2170, while the shared currency had added 0.5 percent to ¥155.50 versus the yen, near an all-time high.

The yen remained steady at ¥118.10 against the US dollar after the Bank of Japan held interest rates at 0.25 percent for the time being. Comments from the Bank’s governor that consumption and inflation were both weaker than expected led analysts to the belief that the interest rate would likely not go up in January, either.

In other Asian currencies, the Thai baht added 0.3 percent versus the greenback to Bt35.87 but several other currencies declined in relation to the dollar. The Korean won dropped 0.5 percent to Won 931.70, while the Malaysian ringgit fell 0.8 percent to M$3.5830 and the Indonesian rupiah was 1 percent lower to Rp9,177.

Sterling was stronger on a report from the Royal Institute of Chartered Surveyors that showed the sales to stock ratio in the UK housing market was at its highest in two years in November. The UK currency added 0.3 percent to £0.6708 versus the euro, while it added 0.4 percent to SFr2.3895 against the Swiss franc and was up 0.7 percent in relation to the US dollar to $1.9630.

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