Euro Trades Near One-Week High Against Dollar on Rate Advantage

Kim-Mai Cutler & Stanley White / Bloomberg | April 8, 2008

The euro traded close to a one-week high against the dollar on speculation the European Central Bank will signal plans to keep interest rates on hold as the Federal Reserve reduces borrowing costs.

The 15-nation currency also rose to near a three-month high against the yen after ECB council member Axel Weber said in Berlin yesterday policy makers remain focused on ensuring price stability. The British pound fell against every major currency after a report showed a slump in house prices. The ECB and Bank of England announce interest-rate decisions in two days' time.

``Because Weber was hawkish, the market has scaled down the probability of a more neutral ECB,'' said Henrik Gullberg, a currency strategist at Calyon, the investment-banking arm of Credit Agricole SA. ``They definitely won't be dovish and that has weighed on chances of seeing a rate cut at some point.'' The euro may rise to $1.60 by the end of the quarter, Gullberg said.

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The euro climbed to $1.5798, the highest since March 31, before trading at $1.5757 at 10:29 a.m. in London from $1.5711 late yesterday in New York. It gained to 161.73 yen, the highest since Jan. 11, before trading at 160.73 yen, from 160.88 yen. The dollar was at 102.01 yen, from 102.40 yen.

The U.S. currency declined to 1.0083 Swiss francs, from 1.0131 yesterday, after former Fed Chairman Alan Greenspan told a conference in Tokyo via satellite that the extent of losses stemming from a collapse in the subprime-mortgage market won't be known for months. Data today will show U.S. pending home sales fell 1 percent in February after no change the previous month, according to a Bloomberg survey.

Pound Declines

The pound fell to within half a euro cent of a record low against the common European currency on speculation the Bank of England will lower interest rates on April 10 as U.K. economic growth slows. British home prices tumbled 2.5 percent last month, the biggest drop since 1992, HBOS Plc said today. The pound traded as low as 79.78 pence per euro, the weakest since March 31. It was at $1.9767 from $1.9883.

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