Euro lifted by data, dollar hit by Fed warning

AFP

LONDON: The euro hit its highest level against the dollar since May on Thursday, boosted by upbeat data while the US unit was hampered after the US Federal Reserve warned on the economic outlook.

The European single currency rallied to 1.3078 dollars -- its highest level since May 10. It later stood at 1.3066 dollars, up from 1.2992 dollars in New York late Wednesday.

Against the Japanese currency, the dollar dipped to 87.19 yen from 87.45 yen on Wednesday.

Business and consumer confidence in the 16-nation eurozone jumped in July to its highest level in more than two years, driven by regional powerhouse Germany, the European Union said Thursday.

The Economic Sentiment Indicator (ESI) produced by the European Commission rose to 101.3 points in the single currency area, an increase of 2.3 points from June and the highest level since March 2008.

Sentiment also improved across the 27-nation European Union, rising by 1.9 points to 102.2 points.

The euro was boosted too by news of lower German unemployment, improving Italian business confidence and higher Spanish housing permits, according to Credit Agricole CIB analyst Frederik Ducrozet.

The euro "managed to break through the 1.3050-dollar level ahead of the ESI release," he said.

"While the data-flow has remained supportive, there is a sense in the market that the dollar is losing momentum, at least against the euro.

"Still, reassuring indicators such as the ESI could provide an excuse for the market to push euro/dollar even higher in the near-term."

The dollar was held back after US durable goods orders fell for a second consecutive month in June while the Fed warned that the "modest" economic recovery was slowing in some parts of the United States.

The "modest" recovery is slowing in some parts of the country, the Federal Reserve said in its latest Beige Book report on Wednesday.

"Economic activity has continued to increase, on balance, since the previous survey" in early June, the Fed said, while noting significant headwinds.

"Among those districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently."

The Fed's survey is likely to fuel concerns -- already fanned by high unemployment and weak business confidence -- that the world's biggest economy is slipping back into recession.

In trading in London, the euro changed hands at 1.3066 dollars against 1.2992 dollars on Wednesday, at 113.94 yen (113.63), 0.8343 pounds (0.8328) and 1.3742 Swiss francs (1.3726).

The dollar stood at 87.19 yen (87.45) and 1.0517 Swiss francs (1.0562).

The pound was at 1.5641 dollars (1.5592).

On the London Bullion Market, the price of gold rose to 1,166.75 dollars an ounce from 1,157 dollars an ounce on Wednesday.