Euro gains on interest rate hike expectations

AP and AFP

BERLIN/TOKYO — The euro is building on gains against the U.S. dollar amid expectations that the European Central Bank (ECB) will lift interest rates before the U.S. Federal Reserve, and concern about turmoil in the Middle East. The 17-nation euro bought US$1.3764 in Thursday morning European trading, a bit above its level of US$1.3744 in New York late Wednesday. The British pound slipped to US$1.6174 from US$1.6200. Recent warnings on inflation from several ECB governing council members have helped fuel speculation that the bank may lift interest rates soon. Higher rates tend to support a currency. Turmoil in Libya hasn’t lifted the U.S. dollar, although it often benefits from political tensions because of its safe-haven status. The Swiss franc hit an all-time high against the U.S. dollar in Asia on Thursday, as investors flocked to the safe haven currency amid fears turmoil in Libya will push oil prices even higher, dealers said. The euro rose to US$1.3781 in Tokyo trade from US$1.3746 in New York late Wednesday. The common currency fell to 113.02 yen from 113.37 yen. The U.S. dollar fell to 82.01 yen from 82.46 yen. The U.S. dollar edged higher against other Asian currencies. It rose to SG$1.2779 from SG$1.2768 on Wednesday, to 1,128.46 Korean won from 1,124.75, to 30.63 Thai baht from 30.60, to NT$29.69 from NT$29.56 and to 43.73 Philippine pesos from 43.60. The unit fell to 8,862.50 Indonesian rupiah from 8,864.00.

Moamer Kadhafi’s regime has lost vast swathes of Libya’s east to an insurrection and the West is braced for a mass exodus from a “bloodbath” in the oil-rich North African state, disrupting production of its high-grade crude.

This has pushed oil prices above US$100 per barrel, a return to highs not seen since 2008 that has fuelled fears the global economic recovery could stall, to the U.S. dollar’s detriment compared with major currencies such as the yen and euro. The U.S. dollar slightly firmed to 0.9280 Swiss francs in afternoon trade, after hitting 0.9273 earlier, but still below its previous record low of 0.9301 marked in December.