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Euro gains against weak Dollar

Wednesday, September 12 09:11:42

The euro hit a four-month high against a struggling dollar today on expectations Germany's top court will approve a larger euro zone rescue fund, although it risked a selloff if the verdict disappointed. The euro rose to $1.28866 on trading platform EBS, up 0.2 percent from late U.S. trade on Tuesday. It gave up some of those gains as sovereign investors and hedge funds sold early in the European session.

Traders said the euro might rise past stop-loss orders at $1.2895 if the German Constitutional Court approves the country's participation in the euro zone's bailout fund. The ruling is due at 0800 GMT. But traders were wary of any strings that the court could attach and which investors will scrutinise closely. That may lead to a modest drop in the euro towards $1.2750, traders said. "The market is not looking for any surprise from the court," said Paul Robson, senior currency strategist at RBS Global Banking.

"But there is always a risk of strict conditionalities being attached by the court and if they are a lot stricter than what the market is expecting, we could see some profit-taking in the euro/dollar." The euro has risen nearly 7 percent since touching a two-year low of $1.2042 in late July, helped by improving confidence towards euro zone assets after the European Central Bank unveiled a plan to lower peripheral countries' borrowing costs and by expectations of more monetary easing by the Federal Reserve. The dollar index traded near a four month low at 79.869, with a warning from Moody's on Tuesday that it could cut the credit rating of the United States also weighing on the currency. ( C) Reuters