Oct 26, 2004
By David McHugh Associated Press Writer
AP Breaking
BERLIN (AP) - The euro hit an eight-month high against the U.S. dollar on Tuesday as fears over high oil prices weighed on the greenback.
The euro traded at $1.2841 Tuesday morning, the highest since a record of $1.2927 on Feb. 18 - the peak since the shared currency came into existence in 1999.
Later Tuesday, the euro slid to $1.2782.
Fears over the effect of high oil prices on the U.S. economic recovery have pushed the euro up out of a trading range between $1.20 and $1.24, where it had been stuck for the past several months, said Dorothea Huttanus, head of foreign exchange research at DZ Bank in Frankfurt.
"It's the oil price, which is putting the recovery in question," Huttanus said. High oil prices have joined with longstanding worries about the size of the U.S. trade deficit to put pressure on the dollar.
In addition, it's widely believed that high oil prices may make the Federal Reserve move more slowly in raising interest rates. Higher interest rates would likely boost the dollar, many believe.
The Fed has already begun raising rates to prevent inflation as the economy expands, but now may delay further increases for fear of adding an additional burden to the economy.
The stronger euro has raised worries that it will hurt Europe's economy because it makes exporters' goods more expensive compared to those of U.S. competitors. It has raised particular concerns in Germany, where a modest economic recovery has been supported almost entirely by foreign trade while consumers at home remain reluctant to spend.
AP-ES-10-26-04 0604EDT
http://ap.tbo.com/ap/breaking/MGBXME9WR0E.html