The dollar is strong and stronger, Euro at new lows:
FOREX-Dollar flexes muscles, hits record euro high
(updates with market moves)
By Elizabeth Lazarowitz
NEW YORK, Jan 31 (Reuters) - The dollar swept to record highs against Europe's single currency for the third
consecutive session on Monday as dealers bet that red-hot U.S. economic growth will continue to blaze.
In thin, jittery trade, the dollar raced to a lifetime high against the beleaguered European currency of 96.90 cents, down
more than half a cent from Friday's close.
The greenback also climbed to a fresh 3-1/2 month high against the Japanese yen, just below 107.50 yen amid broad
dollar gains as Wall Street stocks firmed and markets awaited the Federal Reserve's decision on interest rates this week.
Signs that the U.S. economy continues to chug strongly while market sentiment about economic recovery in the
11-nation euro zone remains gloomy have helped foster widespread demand for the greenback, dealers said.
``Overall, nobody anticipates that the U.S. economy is going to slip and underperform the European economies, and
therefore the dollar remains attractive,' said Alex Beuzelin, foreign exchange market analyst at Ruesch International.
Following in the euro's wake, the Swiss franc slumped to 10-year lows against the dollar.
Growing expectations for higher U.S. interest rates have also helped lift the greenback, analysts said.
The dollar's latest sprint higher extended a rally that started on Friday. Unexpectedly strong U.S. data, which heightened
expectations for an aggressive Fed credit tightening, buoyed the dollar despite a steep decline in U.S. stocks.
``We're focused on the Fed versus the (European Central Bank), and it looks right now like Fed rate hikes are highly
likely...so yields favor the buck,' said Mike Malpede, senior foreign exchange analyst at Refco Group.
In a Reuters survey taken last Friday, 28 of the 30 U.S. primary dealers forecast a 25-basis point rise in rates at the Fed's
policy-setting meeting this Tuesday and Wednesday.
Dealers said gains in the Dow Jones industrial average also helped buoy the dollar. At 1:20 p.m., (1820 GMT) the Dow
was up 85 points at 10,823.
But some traders blamed the U.S. currency's volatile moves on thinned trading conditions, as dealers refrained from
taking significant positions ahead of the Fed's policy decision.
The year-old European currency, which has declined some 16 percent since its debut one year ago, also found itself
under pressure on Monday from a perceived lack of support from European officials.
A draft statement for Monday's meeting of European Union finance ministers said the euro had potential to appreciate --
a restatement of the bloc's official line on the currency -- did little to lift the battered euro.
``Given the shallowness of the retracements and the indelible impression that European officials are not all that
concerned about the euro's weakness, the market will continue to probe for the official pain threshold,' said Marc
Chandler, foreign exchange strategist at Mellon Bank.
Even remarks from ECB president Wim Duisenberg that seemed to surpass euro zone officials' typically bland
statements on the euro were of little help. Duisenberg said for the first time that further weakening in the euro could pose
a risk to inflation in the euro zone.
Over the weekend, Der Spiegel magazine quoting German Finance Minister Hans Eichel as saying the euro was bound
to regain strength because China planned to convert most of its dollar reserves into euros.
Currency bid prices at 1844GMT. All data taken from Reuters with percent change calculated from the daily U.S. close
at 2130GMT.
Last US Close %Chg YTD % 1999
Cls
28 Jan.
-------------------------------------------------------------
Euro/dlr 0.9686 0.9745 -0.61 -3.81 1.0070
Dlr/yen 107.42 107.08 +0.32 +5.10 102.21
Euro/yen 104.11 104.29 -0.17 +0.98 103.10
Dlr/swiss 1.6595 1.6495 +0.61 +4.36 1.5902
Stg/dlr 1.6131 1.6186 -0.34 -0.28 1.6176
Can/dlr 1.4493 1.4448 +0.31 +0.26 1.4455
Aus/dlr 0.6350 0.6322 +0.44 -3.25 0.6563
Euro/swiss 1.6076 1.6095 -0.12 +0.25 1.6036
Euro/stg 0.6003 0.6023 -0.33 -3.78 0.6239
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