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Euro falls amid fears over Ukraine

Friday, July 18 16:36:54

The euro today traded under the psychologically significant $1.35 level for the first time since February as the dollar gained broadly amid geopolitical tensions aggravated by the downing of a Malaysian airliner in Ukraine.

The currency shared by 18 countries has been declining on speculation U.S. policymakers may lift interest rates sooner than markets expected and dipped on Friday to $1.3492 shortly after the Bank of Italy cut its economic outlook, according to Shaun Osborne, currency strategist at TD Securities.

In reducing to 0.2 percent its 2014 growth forecast for Italy, the bank warned that there was significant uncertainty about the outlook for the euro zone's third-largest economy.

The euro last traded at $1.3515, off 0.1 percent for the trading day.

"The euro has been in a range with $1.35 as a bottom," Osborne said. "The euro will probably trend lower now."

The dollar was also up against the yen, with the dollar trading ahead 0.2 percent at 101.35 yen.

An index that measures the dollar against a basket of six other leading currencies was up 0.12 percent at 80.603.

Traders were cautious, shifting away from riskier holdings as events played out in Ukraine, according to Lane Newman, director of foreign exchange at ING Capital Markets.

"You will see a continuation of the risk-off move," Newman said. "I don't think many people want to go into the weekend with risk on."

Oil producer Norway's crown jumped, boosted by concerns about Europe's energy supply as tensions between Russia and the West over Ukraine rose.

The crown rose just over half a percent to trade at 8.3520 crowns per euro.

Valentin Marinov, head of European currency strategy at Citigroup in London, said worries over relations with Russia were outweighing the prospect of another cut in Norwegian interest rates next year.

The Norwegian central bank's shift in June to a looser approach to monetary policy had sent the crown down over 3 percent against the euro in the month to Thursday. (Reuters)

For more visit: www.businessworld.ie