The dollar scored a six-month high against the euro and a two-year peak against the British pound today, as dealers looked to evidence of slowing economic growth in Europe. In late morning trade, the euro sank as low as $1.4571 (Dh 5.3734), which was last seen in February, after the release of downbeat consumer confidence and business sentiment surveys in Germany. The single currency later pulled back to stand at $1.4604, which compared with $1.4751 in New York late yesterday.
The pound, meanwhile, tumbled as low as $1.8331, the lowest point since July 2006. Sterling sank on concerns about the health of the British economy after recent data showed that growth ground to a halt in the second quarter, dealers said. "The dollar continues to be boosted by increased expectations of weaker economic growth in other major developed economies," said Lee Hardman, analyst at The Bank of Tokyo-Mitsubishi UFJ in London.
"It is apparent that euro/dollar is becoming more sensitive to downside surprises in eurozone economic data than US negative surprises." German economic prospects took two big hits on Tuesday, raising fears of recession as both business sentiment and consumer confidence were reported to be falling further. The monthly business climate index calculated by the Munich-based economic research institute Ifo fell to 94.8 points from 97.5 points in July, its lowest level since August 2005.
Economists polled by Dow Jones Newswires had forecast a much more modest drop to 97.1 points. "August's fall in the German Ifo business confidence index clearly adds to the recent run of bad news on the eurozone's largest economy," said Jennifer McKeown, analyst at London-based consultancy Capital Economics. "The fall, from 97.5 to a three-year low of 94.8, was sharper than the consensus forecast but broadly in line with our own expectations. The decline was due to falls in both business expectations and perceptions of current conditions."
