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To: sea_urchin who wrote (31610)	4/12/1999 7:54:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116790

Dollar Falls vs Euro as Lower ECB Rates Seen Fueling Growth; Down vs Yen Dollar Falls as Lower ECB Rates Seen Boosting Europe (Update2) (Updates rates, closing Dow.) New York, April 12 (Bloomberg) -- The dollar slipped against the euro on speculation the European Central Bank's interest rate cut last week will support growth in the 11 nations that use the single currency. The U.S. currency, which traded most of the day at a 2 1/2- week low against the euro, pared losses in late trading as benchmark U.S. stock indexes rose to records. Global investors buying U.S. equities need dollars to pay for them. ''Maybe we've seen the worst of the euro with the rate cut,'' said Jay Bryson, international economist at First Union Corp. in Charlotte, North Carolina. ''That's bullish for the euro and for growth potential in Europe.'' The dollar weakened to $1.0823 per euro from $1.0797 late Friday in New York. It dropped to 120.30 yen from 121.00 and has been trading in a two-yen range this month. The euro retreated from an intraday high of $1.0880 also after Bundesbank President Hans Tietmeyer said the ECB's move Thursday to cut its benchmark interest rate a half point to 2.5 percent won't boost economic growth unless European governments step up efforts to cut budget deficits and reduce companies' labor-related costs. ''A cut in the central bank's rates cannot be a substitute for convincing structural reforms,'' Tietmeyer, a member of the ECB's 17-member Governing Council, said at an economic conference in Stockholm. ''Those responsible for other policy areas are now urged even more to take the necessary steps to improve longer- term growth prospects for the euro area.'' Tietmeyer's comments mirror those by ECB President Wim Duisenberg and suggest the bank wants to maintain pressure on elected officials to change economic policy in the euro region, where 300 million people reside. Positive for Europe Slow growth in many European countries has pushed the euro down almost 7 percent this year and economists cheered the ECB decision Thursday to lower rates to kickstart growth. ''The market sees this rate cut as positive for the growth outlook for Europe,'' said Henry Hunt, who helps oversee about $10 billion as a director at Foreign & Colonial Investment Management. ''That's generally given a better bid to the euro.'' ECB Chief Economist Otmar Issing said he's confident the greater-than-expected, 50 basis-point cut will boost the euro's value and won't fuel inflation,. ''Our interest rate decision will help strengthen confidence in the stability of the euro and in the economy in the euro region,'' Issing said in an interview with the German business daily Handelsblatt published yesterday. ''The markets will confirm that view.'' The ECB's move may help bring better economic figures in the coming months. German industrial production fell 3.4 percent in February, following a 2.9 percent jump in January. Analysts polled by Bloomberg News had predicted a 0.1 percent monthly drop for February and a 0.4 percent gain for January. The rate cut ''will support domestic demand, work off those high inventories and lead to stronger production,'' said First Union's Bryson. ''We're getting a slow grind higher in the euro,'' which could rise to $1.10 in a month and $1.16 by year- end. Kosovo Concerns Economic growth in Europe's single-currency area slipped to 0.2 percent in the fourth quarter of 1998 from 0.7 percent in the third quarter, the European Commission said, confirming earlier estimates. The euro's rise could be impeded by concerns surrounding the military conflict in Kosovo. Britain and the U.S. announced over the weekend they would send additional aircraft to bolster the North Atlantic Treaty Organization's campaign. ''We're still grappling with what's going on in Kosovo,'' said Fernando Medina, senior currency strategist at Banco Atlantico. ''I could see the euro above $1.10 if we get some progress toward peace.'' Earlier, concern about the U.S. stock market dragged on the dollar. The Dow Jones Industrial Average fell as much as 77 points before climbing back to 10,339.51 in late trading, up 165.67 points from its close Friday. The Standard & Poor's 500 Index and Nasdaq Composite Index also closed at records highs. The stock concerns sprang from an announcement Friday by Compaq Computer Corp., the world's largest personal computer maker, which said first-quarter profit will be about 50 percent below estimates because prices are falling and demand is weak. Elsewhere, the British pound rose to $1.6130 from $1.6105 Friday. The U.S. currency was little changed at 1.4851 Swiss francs from 1.4830 francs and fell to 1.4927 Canadian dollars from 1.5002 dollars. ©1999 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.