Dollar weaker after ECB holds rates steady
NEW YORK — The dollar remained lower versus the euro after the European Central Bank and Bank of England left interest rates unchanged Thursday.
The euro had been up before the ECB’s decision and didn’t move much after Jean-Claude Trichet, president of the central bank, said the eurozone economy was “stabilizing and is expected to recover at a gradual pace.” His comments also suggested the bank does not see a threat from inflation, while the recovery would be “uneven,” signaling that interest-rate increases would probably not come any time soon.
Higher interest rates can boost a currency, as better yields make it more attractive to investors.
The ECB’s rate remained at 1 percent, while the Bank of England kept its rate at 0.5 percent.
The Federal Reserve’s federal funds rate is at a range near zero, among the lowest of the major economies.
The 16-nation euro rose to $1.4778 in late New York trading, up from the $1.4671 late Wednesday. That’s slightly below a 12-month high of $1.4803.
The British pound also rose to $1.6067 from $1.5938, while the dollar slipped to 88.52 Japanese yen from 88.63 yen late Wednesday.
Gold prices, meanwhile, rose to a record. Gold for December delivery surged to $1,062.70 an ounce on the New York Mercantile Exchange before trading down to $1,056.30 in late trading. Gold prices are up about 20 percent in 2009.
Gold is often used as a hedge against inflation and a falling dollar.
In London, the Bank of England also said it would not, for now, increase its program to expand the money supply. Such a move could weigh on the pound as it triggers inflation fears.
Trichet also reiterated concerns about the euro’s recent rise against the dollar, which can harm European exports.
In the U.S., better-than-expected retail sales and a government report saying the fewest number of people filed for first-time unemployment aid last week since early January helped boost feelings about the American economic recovery.
Retail sales in September rose — the first monthly gain compared with a year ago since July 2008.
In other trading, the dollar hit a 14-month low against the Australian dollar at 90.51 U.S. cents after the Australian government said the country’s unemployment rate dropped to 5.7 percent in September. Analysts had expected joblessness to rise to 6 percent.
The greenback also fell to 1.0516 Canadian dollars from 1.0637 late Wednesday, and dropped to 1.0272 Swiss francs from 1.0342 francs.
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