23 February 2005, 16:00  Dollar Gains on Euro; German Report Weaker

The U.S. dollar recovered against the euro Wednesday after a monthly survey found German business executives less optimistic about Europe's biggest economy and South Korea denied it plans to sell the currency.
The 12-nation euro dipped to US$1.3211 from US$1.3257 in late New York trading Tuesday, while a sharp drop in Japan's trade surplus also pushed the dollar back up to 104.81 yen, some 0.75 yen above its level late Tuesday.
The British pound fell slightly to US$1.9085 from US$1.9112.
Disappointing data in Germany's Ifo index of business confidence weighed on the euro, especially because analysts had predicted a slight rise. The index, which measures current conditions and executives' six-month outlook, fell to 95.5 from 96.4 in January.
The latest data raised questions about the strength of Germany's economic recovery, which has been dogged by weak domestic demand. Economists say high unemployment and shrinking social programs tend to make German consumers afraid to spend.
Earlier Wednesday, South Korea's central bank denied reports that it was going to start selling the dollar to diversify its foreign reserve holdings. The nation holds massive foreign exchange reserves, and that prospect that it might switch to currencies other than the dollar had sent the dollar lower.
"Reports that the Bank of Korea will sell dollar assets are false," the BOK said in a statement.
The euro soared from about US$1.20 in September to an all-time high of US$1.3667 at the end of December, powered by concerns over the U.S. budget and trade deficits.
While the Bush administration has professed a "strong dollar" policy, many believe it has been tacitly letting the currency fall because it helps boost U.S. exports by making them less expensive.
European leaders have expressed concerns that continuing dollar weakness could start to seriously harm their economies by making exports more expensive or cutting into manufacturers' profits. ()

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