Euro hits 2-week high vs dollar

London, Nov 21 | Updated: Nov 22 2005, 05:42am hrs
The euro jumped to a two-week high versus the dollar on Monday underpinned by comments by European Central Bank president Jean-Claude Trichet who last Friday signaled an imminent interest rate hike in the euro zone. Mr Trichet on Saturday refused to elaborate on his comments on Friday, when he had said the ECB was ready to moderately augment interest rates, saying he had made himself clear.

Investors now await Mr Trichets testimony before the European Parliaments Committee on Economic and Monetary Affairs at 1400 GMT. Todays focus is on Mr Trichet. The euro broke through major resistance at $1.1798 and the next key level is $1.1833, said Monica Fan, head of global FX strategy at RBC Capital Markets.

But with Euribors having sold off on Friday after Mr Trichet comments it will be difficult to pierce that level, she added. Markets have fully priced in a 25-bps rate rise at the ECBs next meeting on Dec 1 to 2.25% from an historic low of 2.0% which has been held since mid-2003. By 0900 GMT, the euro was up 0.4% at $1.1812 and gained nearly a third of a percent against the yen at 140.56.

The euro rose nearly a full US cent on Friday after Mr Trichet suggested the central bank would raise rates in Dec. The rally in the euro (since Friday) has been limited as a Dec rate hike by the ECB has already been pretty much factored into market pricing, UBS said in a research note.