14 August 2003, 13:57  Euro steady ahead of US current account

The euro remains above USD1.13 against the dollar this morning despite data confirming that Germany, the eurozone's largest economy, remains mired in recession. At 0930, the euro was worth USD1.1327, having temporarily dipped to USD1.1250 yesterday after strong US retail figures. Analysts say the dollar is being pressured by a bond sell-off that has pushed bond yields higher and say this afternoon's current account data could add to pressure on the US currency. "Markets are getting increasingly wobbly on the [interest] rate front with 10-year yields hitting 4.56pc," said Colin Hunt at Goodbody Stockbrokers.
Rising bond yields will make it more difficult for companies to borrow and, with the equity market still exposed, the US is dependent on inflows into the bond market to fund its trade deficit, according to Geraldine Concagh, senior economist at AIB Treasury. "Thus, the current sell-off in US bonds leaves the dollar vulnerable to a widening debt burden," she said. ///www.fxcentre.com

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