Euro Leaps to New Highs
LONDON (Reuters) - The euro began the year on a firm note, leaping
to 10-month highs versus the yen and five-month highs against the dollar
amid persistent concern of a sharp economic slowdown in the United
States and Japan.
Recent European data have reinforced the view that euro-zone growth
remains relatively robust and well placed to withstand a period of slower
global growth, analysts said.
``The euro looks set to build on its recent gains with no fresh news to
change the perception of a radical economic slowdown in the U.S. and
stalling growth or even recession in Japan,'' said Nick Parsons, currency
strategist at Commerzbank in London.
Comments from Bank of France Governor Jean-Claude Trichet also
supported the euro. Speaking on Europe 1 radio station, Trichet said he
expected euro-zone countries to see economic growth of around three
percent in 2001 without inflationary pressures.
``Trichet's optimism on euro-zone growth is a view shared by most
market participants,'' said Audrey Childe-Freeman, European economist
at CIBC World Markets.
The market shrugged off data showing the pace of manufacturing
expansion in France and Italy slowed in December, as expected.
Manufacturing PMI data for the euro-zone as a whole are due at 0900
GMT.
Bullishness over the euro-zone's growth prospects pushed the euro
above $0.9450, its highest since last July and above 108 yen, its
strongest since late February 2000.
The euro's gains against the two major currencies also lifted it to
six-month highs against sterling, above 63 pence.
US DATA IN FOCUS
Elsewhere, traders are awaiting the U.S. National Association of
Purchasing Management's (NAPM) survey of manufacturing activity to
see if growth shrinks for a fifth straight month.
Manufacturing is among the hardest-hit sectors as growth has slowed,
and it showed one of the first major signals the economy was slowing.
``The U.S. data will be crucial for the dollar going forward,'' said Ian
Gunner, foreign exchange strategist at ABN Amro in London.
``Until we see stronger data, fears of a hard landing in the U.S. will
persist and we could see the euro at $0.97 in the next one to two
weeks.''
The December NAPM is at 1500 GMT and economists polled by
Reuters expect it to fall to 47.0 from 47.7 a month earlier, primarily due
to slowing new orders and swelling inventories.
Auto manufacturers will also release December sales estimates on
Tuesday, although release times vary.
Auto firms have struggled with mounting inventories and sliding demand
and a further slip in sales could indicate U.S. consumers are reining in
spending.
Consumer spending makes up about two-thirds of U.S. economic
activity.
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