The euro continued to move up against the dollar in early deals today, following comments from FOMC member Ben Bernanke that the Fed is prepared to cut rates to zero if necessary. At 0910, the single currency was trading up at USD1.1494, although against sterling, it was down a touch at STG0.7137. Niall Dunne of Ulster Bank Financial Markets this morning highlighted that Bernanke also forecast that if the US recovered, the recovery would remain fragile until 2005 - "not especially supportive of equities then". "And if equities don't make gains, foreign investors will stay away from US denominated securities, and the current account deficits will worsen. If there's weak demand for US securities, there'll be weak demand for the dollar," Dunne added.
Dunne also said that the euro could trade higher against the dollar for the rest of the year, although gains would not be due to any fundamental strength in the eurozone. "As we've said before, the euro isn't strengthening because the eurozone is growing faster than the US; rather the euro is strengthening by default," he said. //www.fxcentre.com/