Euro dives to 2008 low against dollar (AFP)
04.09.2008 21:45 Business
In late European trading, the euro was trading at 1.4366 dollars against 1.4492 late on Wednesday. The European single currency hit its lowest level since December 21 of 1.4326 dollars earlier in the afternoon.
The dollar fell against the Japanese currency to 154.75 yen from 156.92 on Wednesday, but rose to a two-and-a-half-year high against the British pound.
"There's definitely an air of panic surrounding the health of national economies," said an analyst at CMC Markets, James Hughes.
"Just look at Alastair Darling's interview at the weekend whilst yesterday the German Finance Minister was on the defensive explaining that his country was not facing a recession as we move towards the year end," he added.
British finance minister Alastair Darling said at the weekend that Britain was arguably facing its worst economic downturn in 60 years.
Both the European Central Bank and the Bank of England announced Thursday that they had kept their key lending rates unchanged at 4.25 percent and 5.00 percent respectively.
The decisions were widely expected, but comments by ECB president Jean-Claude Trichet moved the market afterwards.
He said the central bank had cut its 2008 growth forecast to 1.4 percent from 1.8 percent previously, and estimated growth next year at 1.2 percent, compared with its earlier outlook of 1.5 percent.
He gave no indication the bank was ready to lower interest rates to help stimulate the increasingly fragile-looking eurozone economy.
He did take note that the "euro area economy is currently experiencing an episode of weak activity," following a contraction in the second quarter, the 15-nation bloc's first such decline.
The Swedish central bank on Thursday raised its key interest rate by a quarter of a percentage point to 4.75 percent to counter inflationary pressures.
The increase was the third this year and the bank had previously hinted a fourth rate hike might be in store before 2009.
"Inflation has continued to rise in Sweden and the rate increase is necessary to prevent the high inflation from becoming entrenched," the Riksbank said, adding that it wanted to "prevent the increase in energy and food prices from spreading to other areas."
Elsewhere, the dollar was supported by a survey from the Institute for Supply Management which showed that service sector activity in the United States mounted an unexpected rebound in August as the pace of price increases eased a bit.
Its index of non-manufacturing activity came in at 50.6 from 49.5 in July and 48.2 in June, indicating modest economic expansion with a reading above 50.0.
In late London trading on Thursday, the euro changed hands at 1.4366 dollars against 1.4492 late on Wednesday, at 154.75 yen (156.92), 0.8117 pounds (0.8154) and 1.5936 Swiss francs (1.6032).
The dollar stood at 107.78 yen (108.27) and 1.1098 Swiss francs (1.1061).
The pound was at 1.7689 dollars (1.7767).
On the London Bullion Market, the price of gold rose to 805.75 dollars per ounce from 803.50 dollars late on Wednesday.
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