Euro surges against dollar to near-year high

September 17, 2009 12:47:06 PM

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The euro rose Wednesday against the dollar to the highest level in nearly a year, buoyed by a rising tide of optimism that a global economic recovery is underway.

The single European currency fetched 1.4708 dollars at 2100 GMT, up from 1.4658 dollars late Tuesday.
The dollar fell to 90.94 yen from 91.08 yen.

The euro, which has been on an upward track since crossing the 1.45-dollar level last week, surged to 1.4736 dollars at one point, the highest level since September 25, 2008.

The dollar weakened as a US stocks rally extended 11-month highs on robust official economic data that whetted risk appetite a day after Federal Reserve chairman Ben Bernanke said the US recession most likely was over.

"US economic data was fairly supportive of Bernanke’s claims," said Terri Belkas of Forex Capital Markets.

Official data showed US industrial production jumped 0.8 percent in August, the second straight monthly gain,
US consumer prices rose 0.4 percent in August, with the core inflation rate up a modest 0.1 percent, in a report that eased fears about both deflation and resurgent inflation.

Belkas's colleague Jamie Saettele said the US currency "remains vulnerable across the board, with the exception being the British pound."

But Kathy Lien, at Global Futures and Forex, said the dollar's weakness may be ripe for correction.

"Although there are no shortage of reasons for traders to sell dollars, the trade is getting crowded. We are nearing an inflection in the major currencies which means that the dollar could be setting up for a rally because every strong trend has its corrections," Lien said.

Still, Lien reiterated her bearishness on the dollar.

"Not only is it one of the cheapest funding currencies, but it stands to lose value on both good and bad news," she said.

The yen gained as Japan's new center-left Prime Minister Yukio Hatoyama took command of Asia's biggest economy.

Hirohisa Fujii, a former bureaucrat tapped to be the new finance minister, said he opposed intervening in the currency market given the current economic situation, Kyodo News reported.

"The yen’s strength today is explained by currency bullish comments from Japan’s incoming finance minister, but we still doubt that the Japanese authorities’ new ‘hands-off’ approach to the currency justifies a change to our bearish medium-term yen outlook," said Vassili Serebriakov of Wells Fargo Bank.

In late New York trading, the dollar fell to 1.0317 Swiss francs from 1.0344 late Tuesday.

The pound inched up to 1.6486 dollars from 1.6489.