The dollar rose one percent against the euro on Friday, bolstered by Washington's pledge for a tighter budget and strong dollar policy and signs the United States could accelerate the pace of raising interest rates.
The dollar's rise was also driven by St. Louis Federal Reserve President William Poole after he told that the central bank would not hesitate to depart from its pace of measured interest rate increases if it deems necessary.The dollar's rise was also driven by St. Louis Federal Reserve President William Poole after he told that the central bank would not hesitate to depart from its pace of measured interest rate increases if it deems necessary.The dollar's rise was also driven by St. Louis Federal Reserve President William Poole after he told that the central bank would not hesitate to depart from its pace of measured interest rate increases if it deems necessary.
President Bush said in an interview on Thursday that the budget he proposes next month will freeze spending for some programs and deny funding to others to meet his deficit reduction goals.
"There's a perception in the market that something tangible maybe coming out (from the Bush administration) to tackle the budget and current account deficits," said Kamal Sharma, foreign exchange strategist at Dresdner Kleinwort Wasserstein.
Bush repeated the administration's strong dollar policy and said he was confident that foreign investors will find the U.S. a good place to invest.
By 3:56 a.m. EST, the dollar stood at $1.3078 per euro up around one percent from late New York levels on Thursday. It traded at 102.89 yen, a gain of half a percent on the day.
The euro also hit a seven-week low versus the yen as traders digested European Central Bank comments the previous day that Asian currencies should move more freely.
The euro stood at around 134.58 yen, dropping below 135 yen for the first time since late November. It was at 135.36 yen in late U.S. trade.
In the last three months of 2004, the dollar fell more than eight percent against the euro as the market focused on the U.S. ability to fund its huge current account and budget deficits.

EURO UNDER PRESSURE

Pressure on the euro mounted after the ECB President Jean-Claude Trichet on Thursday supported ECB Chief Economist Otmar Issing's remarks earlier in the week that Asian currencies, must do more to bear the burden of dollar weakness.
The comments were seen as directed at China and the pegging of its currency to the dollar, which some nations say gives it an unfair trade advantage.
The market will be watching for any further comments when Trichet gives a speech at 4 a.m. EST on Friday.
"Since Issing's comments and even before, there has been considerable pressure on the euro/yen, which has been driving currency movements," said Hideaki Furumaya, forex manager at Trust and Custody Services Bank.
He added that this pressure would continue at least until a meeting of the Group of Seven industrialized nations next month.