War Talk Sends Euro Near Four-Year High

War talk has sent the dollar tumbling

January 27, 2003

The European single currency has reached a near four-year high against the US dollar on continuing fears over a war on Iraq and the global economic outlook.

At 1104 GMT the euro traded at $1.0905, a level not seen since March 1999.

"It's a matter of a concern for us if the fall in the value of the dollar is too rapid," Germany's central bank president and European Central Bank board member Ernst Welteke said on Monday.

Continuing weakness of the dollar could make exports from the euro zone, where the leading economies of Germany and France are struggling, uncompetitive on the global markets.

The sell-off of the dollar also sent the British pound to a new three-year high against the greenback, while the safe-haven Swiss franc maintain a four-year high.

Anti-dollar feeling

Sterling rose as high as $1.6377 in early European trade, its highest since January 2000.

"Last week's close above $1.0700 has forced us to adjust our view," said Nicole Elliott of Mizuho Corporate Bank.

"It suggests we have underestimated bullish momentum and the gathering anti-dollar feeling."

UN arms inspectors are due to deliver a crucial report on Monday to the Security Council which is expected to be critical of Iraq's cooperation but is unlikely to conclude that it has an active weapons programme.

The dollar's decline has been accelerated in recent weeks, falling by 3.5% against the euro since the start of the year, by financial market expectations that the US will take unilateral action against Iraq.

http://news.bbc.co.uk/2/hi/business/2697405.stm