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Dollar slides against euro as German business confidence rises (AFP)
Tue Dec 19, 5:24 PM ET
NEW YORK (AFP) - The dollar fell against the euro, primarily as the European currency benefitted from robust German business confidence figures, traders said.
The euro was swapping hands at 1.3190 dollars at 2200 GMT, compared with 1.3097 dollars late Monday in New York.
The US currency was meanwhile quoted at 118.10 yen compared with 118.06 yen late on Monday.
The euro picked up momentum after an upbeat German business confidence survey suggested that Europe's biggest economy may be performing better than recently thought.
The Ifo institute said its business climate index for Germany rose to 108.7 in December, its highest level since 1990, from 106.8 in November. Analysts had expected a far more modest rise to 107.0.
The dollar declined despite a sharp rise in US wholesale price inflation last month, a development which on another day might have been expected to lift the dollar as it theoretically raises the likelihood of higher interest rates.
US inflation made a surprise comeback in November with a surprising 2.0-percent rise in wholesale prices, the biggest monthly jump in 30 years, according to the Labor Department.
The producer price index (PPI) was far ahead of Wall Street expectations of a 0.5 percent rise and showed strong increases in a wide range of goods.
"Just when the forex market was ready to write off November inflation as a fundamental compass for the dollar, the producer price index brought the pricing component back to life," said John Kicklighter, a currency analyst at Forex Capital Markets.
"Though the reads were a surprise for inflation hawks, anti-dollar positions were adamant in their valuations and cut the greenbacks advances before momentum could stick," Kicklighter said.
The PPI core index, which excludes volatile food and energy prices, was up 1.3 percent -- the largest increase in more than 25 years -- against expectations of a 0.2-percent rise.
The surprise jump in prices challenges expectations from economists and the Federal Reserve that inflation is under control.
Elsewhere, the yen was weaker, particularly against the pound, the euro and the dollar, in line with other Asian currencies after the Bank of Thailand announced measures overnight to limit speculative capital inflows and counter the appreciation of the baht, even though the move was rescinded later in the day.
The new measures, which sparked a 15 percent sell-off on the Thai stock market, would have required speculators to keep 30 percent of their money in the country for at least a year or face stiff penalties.
The US government meanwhile backed off from labelling China a currency "manipulator" in a twice-yearly report Tuesday but urged the country to do much more to reform its foreign exchange regime.
"The Department of the Treasury concluded that no major trading partner of the United States met the technical requirements for designation," the report said, referring to a 1988 trade act that provides for sanctions against a US trading partner that distorts its exchange rate.
In late New York trade, the dollar stood at 1.2145 Swiss francs after 1.2223 Monday.
The pound was traded at 1.9684 dollars from 1.9477.
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