Dollar to hit low agasint Euro

The weak dollar makes European goods relatively more expensive

The dollar weakened against the euro to hit a new record low, amid continued fears over the state of the US economy. It took $1.540 to buy a euro in morning trade on Friday, up from $1.537 a day earlier, also a record. At the same time, one pound was worth $2.01.

Meanwhile, the dollar fell below 102 yen for the first time in three years.

Both the euro and sterling strengthened against the dollar after interest rates in the UK and the eurozone remained on hold on Thursday.

European firms are finding it harder to sell their goods as they become relatively more expensive to US products.

Speaking on Thursday, the head of the European Central Bank, Jean-Claude Trichet, said it was likely the euro would remain strong.

The US Federal Reserve has been reducing interest rates to tackle the cooling economy, but the ECB reiterated the need to focus on addressing inflation and suggested a rate cut was not imminent.

Inflation in the eurozone has reached its highest in six years.

Analysts are awaiting figures on US non-farm payrolls, due at 1330 GMT, and fear they could show that the world’s biggest economy is heading for a recession.

“Markets are braced for a rather bad employment number today. These ongoing recessionary worries are hitting risk appetite across the board,” said Geoffrey Yu, currency strategist at UBS in Zurich.

Source: bbc.co.uk