Tuesday December 9, 11:15 PM
Dollar drifts higher against euro
NEW YORK (AFP) - The dollar edged higher against the euro Tuesday despite data showing investor confidence in Germany, Europe's largest economy, proved surprisingly robust in December.
The euro dipped to 1.2923 dollars around 2200 GMT 1.2952 late Monday in New York.
The euro and the dollar drifted higher and lower against each other, with the euro briefly climbing as high as 1.3001 dollars, last seen on November 26, and hitting a low of 1.2797 in a rudderless market.
The dollar fell against the yen, trading at 92.11 yen against 92.77 on Monday.
"The trading in the currencies can be best described as schizophrenic," said Greg Michalowski, an analyst at FXDD.
"The fact is, folks, the markets are not showing signs of trending, nor looking to want to trend as positions are in the hands of shorter term traders who at the first sign of reversing, simply liquidate."
The euro gained some support on news that German investors had been surprisingly less gloomy for a second month running, even though the country is in a recession that analysts warn is nowhere near an end.
The ZEW survey of investor confidence showed a surprise gain for December of 8.3 points to minus 45.2 points, compared with a forecast fall to minus 55.
It was the second straight month that investor confidence was stronger than expected. Last week the European Central Bank (ECB) slashed a record 0.75 point from its key interest rate, bringing it 2.50 percent in an effort to fight eurozone recession.
Mannheim-based ZEW said the improvement "signals that the worries about a further aggravation of the recession in the middle of 2009 seem to be limited."
"The interest rate cuts of central banks worldwide and the economic rescue packages should bolster the economic development," it added.
"The euro found support after the German ZEW survey outlook reading unexpectedly rose to -45.2 from -53.5 as aggressive easing from the ECB has boosted investor's optimism," said John Rivera, an analyst at Forex Capital Markets.
The pound tumbled after the latest round of poor British economic data signaled the country will experience a deep recession that could spark even more sharp interest rate cuts, analysts said.
Sterling hit a new record low against the euro, at 1.1403 euros after the Office for National Statistics reported British manufacturing output sank 1.4 percent in October from September, the eighth monthly drop in a row, and was down 4.9 percent from a year ago.
The monthly fall was the largest decline since March 2005 and resulted in the longest consecutive contraction in manufacturing output since 1980.
Britain's economy shrank 0.5 percent in the third quarter and was expected to have contracted further in the fourth quarter.
In late New York trade, the pound fell to 1.4748 from 1.4902 late Monday.
The dollar stood at 1.2055 Swiss francs, up from 1.2037.
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