Euro Rises Against Dollar After Trichet Says ECB Ready on Rates


The euro rose by the most in a week against the dollar after European Central Bank President Jean- Claude Trichet signaled policy makers won't follow the Federal Reserve and the Bank of England in cutting interest rates.

The euro strengthened against 12 of the 16 most-traded currencies after the ECB kept the main refinancing rate at 4 percent today and Trichet said the central bank will ``not tolerate'' an inflation spiral of rising prices and wages. Futures trading shows the Federal Reserve will probably lower its key rate by half a percentage point to 3.75 percent Jan. 30.

The euro traded at $1.4747 at 3:05 p.m. in London, from $1.4659 yesterday. The common currency has declined 1.6 percent since climbing to a record high of $1.4967 on Nov. 23. Against the yen, it rose to 161.76 from 161.31.

Trichet also said the ECB and U.S. central bank will offer additional funds to money markets in January. He said the ECB will inject $10 billion in 28-day funds in two operations this month.

Gains by the euro may be limited as investors bet the region's economy will slow. Economic confidence in the region fell to the lowest in almost two years during December, retail sales tumbled the most in at least 10 years in November and industrial production declined in Germany, France and Spain, reports this month have shown.


TradingEconomics.com, Bloomberg
1/10/2008 8:21:36 AM