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Euro drifts lower on slip in German business sentiment

Euro drifts lower on slip in German business sentiment

The euro drifted lower against the U.S. dollar Tuesday after a report that showed German business confidence slipped again was unable to offset weakening consumer confidence in the United States.
The 13-nation euro drifted down to US$1.3645, compared with its level of US$1.3653 in New York late Monday. The British pound dropped to US$2.0093 from US$2.0129.
The euro slipped after Germany's Ifo institute said its business confidence index fell to 105.8 points in August from 106.4 in July, the third successive monthly decline in business sentiment in Europe's biggest economy. That was still a better performance than economists had predicted.
Later Tuesday, the New York-based Conference Board said that its Consumer Confidence Index declined to 105.0 from a revised reading of 111.9 in July as volatile financial markets and housing problems took a toll.
The dollar also remains sensitive to mixed predictions as to whether the U.S. Federal Reserve will cut its main interest rate from 5.25 percent next month.
"Much of the dollar activity we're seeing now is revolving around speculation as to whether we'll see a cut in rates by the Fed," said James Hughes, an analyst with CMC Markets in London.
Analysts also have raised doubts about prospects of the European Central Bank raising its key refinancing rate to 4.25 percent next month, following mounting problems with credit availability _ although many have since reverted to predicting the quarter-point increase.
On Tuesday, ECB President Jean-Claude Trichet, in a speech in Hungary, said the bank was not "pre-committed" to any rate increase at its Sept. 6 meeting.
He said that comments at the bank's Aug. 2 news briefing that telegraphed a likely rate rise were made before the credit crisis in world markets took hold.
Higher interest rates, used to combat inflation, can strengthen a currency by giving investors higher returns on investments denominated in it.
In other trading, the dollar drifted lower against the Japanese currency, falling to 114.86 yen from 116.13.


Updated : 2021-02-27 08:53 GMT+08:00