U.S. Dollar Hits High Against Euro

NewsMax
Oct. 19, 2005

FRANKFURT, Germany -- The dollar rose to a 4½ month high against the euro on Tuesday after U.S. Federal Reserve Chairman Alan Greenspan said the impact from the spike in energy prices after the Gulf Coast hurricanes will not be as severe as from the oil shocks of the 1970s.

The euro bought $1.1926 in late European trading - down from $1.2035 in New York late Monday. The dollar also rose to a two-year high against the Japanese currency, climbing to 115.89 yen from 114.88 yen on the view the Federal Reserve will not be deterred from raising interest rates. Higher rates bolster a currency by increasing the return on some assets denominated in it.

Greenspan, speaking in Tokyo, said with world oil markets exceptionally tight because of rising global demand, the likelihood of a sizable spike in prices because of the loss of Gulf Coast production was "an accident waiting to happen." But he added it should not have the severe economic impact of the 1970s oil shocks.

The European Union's statistical agency Eurostat found high oil prices pushed inflation in the 12 countries that use the common currency to 2.6 percent on the year in September - higher than expected - from 2.2 percent a year ago.

Those figures are likely to put more pressure on the European Central Bank to consider raising its interest rate from 2 percent when it meets Nov. 3.

The British pound fell to $1.7463 from $1.7543 as data showed surging gas prices also pushed U.K. consumer prices 2.5 percent higher in September, keeping annualized inflation at its highest level since current records began in 1997. The increase followed a 2.4 percent gain in August but was lower than economists had predicted.