Euro slightly down against U.S. dollar

The euro fell back slightly against the U.S. dollar on Wednesday despite lackluster economic reports from the United States.

The 13-nation euro bought US$1.2921 in morning European trading, compared with US$1.2923 late Tuesday, as the dollar shrugged off a report by New York Federal Reserve that its Empire State Manufacturing index dropped to 9.1 in January from 22.2 in December.

"The economic news coming out of the U.S. so far this week may have been some way short of stellar but the greenback is managing to find at least a degree of support despite the prospect of interest rates at the Fed falling in the near term," said David Jones, chief markets analyst at CMC Markets in London. "The fact that other major central banks are eyeing tighter monetary policies as we move through the first quarter of 2007 should be adding to the pressure."

Higher rates, a weapon against inflation, support a currency by making some assets denominated in that currency more attractive to investors.

The euro recently has been boosted by expectations that the European Central Bank will continue raising rates, while the U.S. Federal Reserve has left its own rates unchanged in recent months.

The pound was also barely changed against the dollar, buying US$1.9642, compared with US$1.9626 on Tuesday.

The dollar was slightly higher against the Japanese currency, edging up to 120.64 yen from 120.60 on Tuesday as speculation whether the Bank of Japan's next interest rate move, reports AP.

"The hike had been seen as almost a given earlier in the week but media speculation is now suggesting that rates will again be left at 0.25," Jones said. "Although this may help explain the fact the yen is sitting around 13 month lows against the dollar, should the hike materialize a noticeable yen rally has to be expected."

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