BERLIN – The U.S. dollar gained against the euro on Tuesday, with the European currency dropping below $1.33 as dealing picked up after the holiday period.
The dollar rose following news that Federal Reserve policy-makers suggested at their December meeting that they would continue to push short-term interest rates higher to blunt inflation, according to minutes of the Fed’s meeting released Tuesday.
Economists predict interest rates will probably go up by another quarter-point when the Fed meets next Feb. 1-2. At the Fed’s Dec. 14 meeting, policy-makers boosted the federal funds rate by one-quarter of a percentage point, marking the fifth increase in this key rate in 2004
The euro fell to $1.3273 in late trading in New York. Late Monday, it fetched $1.3483, well below its all-time high of $1.3667 on Thursday.
Traders saw the euro’s fall partially as a temporary pullback from that record, which was set during thin, volatile holiday trading. The euro has risen rapidly since September, when it traded at around $1.20.
“It’s not a change in trend. It’s definitely a pronounced move, but the underlying dollar negatives haven’t gone away at all,” said Riz Din, a currency analyst with Barclay’s Capital in London.
In late New York trading on Tuesday, the dollar was higher against major rivals. The U.S. currency bought 104.50 yen, up from 102.68 yen late Monday; 1.1697 Swiss francs, up from 1.1473; and 1.2226 Canadian dollars, up from 1.2071. The British pound was at $1.8804, down from $1.9048.
The strength of the 12-nation euro stems largely from lack of confidence in the dollar, which has been dragged down by worries about the United States’ ballooning trade and budget deficits.
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