Euro marginally higher against U.S. dollar

The euro edged slightly higher against the U.S. dollar on Monday, with markets awaiting pointers on the future direction of interest rates.

The 13-nation euro bought US$1.2969 in morning European trading, slightly above its level of US$1.2961 in New York late Friday.

The British pound edged up to US$1.9752 from US$1.9740.

The dollar has suffered recently from expectations that the U.S. Federal Reserve will keep interest rates static or even cut them while the European Central Bank increases rates. The Bank of England surprised markets earlier this month by lifting its key rate.

The release of the Bank of England's meeting minutes, expected Wednesday, "should provide a focal point for many," said David Jones, the chief markets analyst at CMC Markets.

"The market is going to be keen to establish just how strong the decision to hike rates earlier in the month was and ... there's also speculation that additional rate hikes may now be forthcoming in the first half of 2007," he added.

The euro "has fared less well of late with rates remaining on hold," Jones noted.

Higher interest rates, a weapon against inflation, support a currency by making some assets denominated in that currency more attractive to investors. The Fed has kept interest rates unchanged at 5.25 percent since August after a more than two-year string of hikes, reports AP.

The dollar rose Monday to 121.38 Japanese yen from 121.23 yen, boosted by perceptions that the Bank of Japan bowed to government pressure in not raising a benchmark interest rate last week.

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