London, Jan 25; The euro regained more than half a cent against the dollar on Tuesday on the back of sharp US stocks losses overnight, after flirting with parity against the US currency in the previous session. The euro had briefly dipped to the one-to-one level against the dollar in New York trade on Monday when dealers were disappointed that a Group of Seven statement released at the weekend failed to show concern over the single currency's persistent weakness.But a 2.16 per cent fall in the Dow Jones Industrial Average and a 3.29 percent slide in the Nasdaq composite index on Monday hit the dollar, allowing the single European currency to recover much of the ground lost the day before.
"Market action has confirmed that parity is still a substantial barrier," said Teis Knutsen, Chief strategist at SEB Merchant Banking in Copenhagen. "The euro is still unable to trade on its own merit, but in an environment of weaker US stocks the euro would tend to do better."
US stocks were hit after Atlanta Fed President Jack Guynn, a voting Federal Open Market Committee member, said on Monday he did not see signs that the Federal Reserve's three interest rate hikes in 1999 were slowing consumer demand, reigniting fears of an aggressive interest rate tightening in the US. The single European currency stood above $1.0060, more than 0.5 per cent up from seven-week lows around parity it set a day earlier. The euro was half a pence up from record lows set against the pound on Monday and had recovered around 1.5 percent from its Monday's three-week low at 104.80 against the yen.
Analysts said the market was already focusing on US Federal Reserve Chairman Alan Greenspan's testimony to the US Senate Budget Committee at 1500 GMT in the hope of getting hints on the Fed's future decisions on rates.
"If there is going to be continued concern about rising interest rates in the U.S., Particularly as we hear Greenspan's comments later on, that might provide a bit of support for the euro," said Jeremy Stretch, currency strategist at NatWest Global Financial Markets in London.
Analysts said a rise in French December consumer spending showed that the economic growth pattern in France was healthy and should provide limited support to the euro. The 0.1 percent monthly increase was slightly below expectations, but thanks to an upward revision of the November figures, the year-on-year increase moved up to 4.8 percent, which was above forecast.
Meanwhile the dollar was trapped in a tight range just below, holding ground gained on Monday as overseas speculators looked for the yen to weaken further in the wake of the G7 statement, which highlighted the seven nations' shared concern over the yen's strength.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.