Dollar continues to lay low
LONDON, England (Reuters) -- The dollar held near recent record lows versus the euro on Thursday on a growing view the European Central Bank may tolerate further gains in the single currency, with investors awaiting key German sentiment data.
ECB President Jean-Claude Trichet was quoted on Thursday as saying he was happy that both Europe and the United States were aiming to keep their currencies strong and stable.
His comments came a day after ECB chief economist Otmar Issing was quoted as saying the euro's exchange rate against the dollar was back to normal, having reached the same level as around the time of its introduction of $1.17 in 1999.
There was also a news agency report on Wednesday the ECB was unlikely to consider currency intervention before the euro reaches $1.35.
"Looking at volatility, the euro's move is orderly so far and euro zone policymakers are not worried about the euro and perhaps the opposite - they see higher inflation but they don't want to raise rates yet. A stronger currency eases inflation," said Benedikt Germanier, currency strategist at UBS.
"Exports are important to a recovery in the euro zone but trade within the euro zone consists of more than two thirds of total exports. So the stronger euro doesn't really matter, however it can hurt in an environment of a synchronized upturn in the global economy."
By 0831 GMT the euro was trading at $1.2412, having risen to a record peak of $1.2422 on Wednesday. That was the 12th record high of the past 14 trading sessions for the euro, which has surged almost 19 percent this year.
The dollar has been under pressure across the board on concerns about the widening current account deficit and expectations U.S. interest rates will remain low for some time.
Against the yen, the dollar was around 107.48 yen, little changed on the day. Sterling remained firm, holding at around $1.7650, but below Wednesday's 11-year high near $1.7700.
The closely-watched German Ifo sentiment index for December is due at 0900 GMT and is forecast to rise for an eighth straight month to 96.5 from 95.7 in November.
"It really fits in with a story of the euro zone fundamentals improving. There is a fair chance that the euro can gain from a cyclical upturn," Germanier said.
Data and Japan funds in focus
U.S. weekly jobless claims, due at 1330 GMT, are expected to show a total of 365,000 new filings.
The Philadelphia Federal Reserve Bank was due to release its December business activity survey at 1700 GMT. The index was seen down slightly to 25.4 from 25.9 in November.
Investors are on watch for any signs of intervention by the Japanese monetary authorities with speculation intensifying the government is set to announce it would raise the borrowing limit for funds for its foreign exchange operations.
Zembei Mizoguchi, vice finance minister for international affairs, said on Thursday that the government had not yet decided. The move is widely expected however so that the government can facilitate more yen-selling intervention.
Government sources have told Reuters that Japan would raise the borrowing limit on its foreign exchange account to 100 trillion yen ($931.2 billion) for the fiscal year ending next March from the current ceiling of 79 trillion yen.
"We believe that intervention will only intermittently stop the yen's rise against the dollar and it will not alter a trend of dollar weakness," said Junya Tanase, forex strategist at JP Morgan Chase in Tokyo.
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