Euro lower against US dollar

The euro was slightly lower against the U.S. dollar on Thursday as the European Central Bank met in Austria to decide whether to keep interest rates steady.

The 13-nation euro fell to US$1.4104 in midmorning European trading, down from the US$1.4108 it bought late Wednesday in New York - and more than 1 U.S. cent off its all-time high of US$1.4284 set on Monday.

The British pound fell slightly to US$2.0296 from US$2.0321 the day before, while the dollar weakened to purchase 116.56 Japanese yen from 116.70 in New York.

"There has been something of a rebound for the greenback in overnight trade against both the pound and euro as suggestions that the U.S. economy may well be weathering the sub-prime fall out better than had been expected previously continue to gain credibility," said James Hughes, a market analyst at CMC Markets in London.

But a decision by the ECB to raise its benchmark rate from 4 percent - a six-year high - could force the euro higher against the dollar, a move that would stoke concern among euro zone politicians fearful of its affect on economic growth.

A higher euro makes goods from the euro zone more expensive for customers elsewhere, and cuts into manufacturers' profits if they try to keep the U.S. dollar price of products constant. While it makes U.S. exports cheaper, it cuts the spending power of Americans visiting or working in Europe.

France's new President Nicholas Sarkozy has called for the ECB to do more to dampen the euro's rise.

The dollar's string of record lows recently began after the Fed cut rates last month by a larger-than-expected half percentage point to 4.75 percent.

Lower U.S. interest rates, used to jump-start the economy, can weaken its currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.

"There's still consensus that we'll see at least one more rate cut from the Fed before the year end and this has likely been fully priced in now," Hughes said. "But assuming there are no disasters with the non-farm payrolls (Friday) then there may be scope to ensure we don't see a return to the recent dollar lows again in the near term."

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Author`s name Angela Antonova
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