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Wednesday, 22 May, 2002, 23:20 GMT 00:20 UK
Euro soars against dollar
The euro has soared to a nine-month high against the dollar amid persistent worries over sluggish corporate profits in the US.

The euro was half a cent up on the day at $0.9249 by 2100 GMT on Wednesday, having earlier jumped to $0.9276 - a level last seen in September.

Analysts attributed the euro's rise to growing doubts over the strength of the US economic recovery following a recent string of disappointing corporate results.

Fears over a fresh wave of terrorist attacks in the US were also cited as a factor behind the turnaround in the euro's fortunes.

"It does look as though we are seeing a significant shift in sentiment," said BNP Paribas currency strategist Ian Stannard.

He said the euro could breach the $0.93 level within a week if current trends persisted.

Rate pressure eases

The euro's gains against the dollar will make eurozone exports more expensive, and hence less competitive on dollar-denominated world markets.

But they will also keep eurozone inflation in check by curbing the price of imported goods, giving the European Central Bank more leeway to put off a widely expected increase in interest rates.

The euro, launched as a tradeable currency on 1 January 1999, lost nearly 20% of its value against the dollar within a year as US economic growth far outstripped the eurozone's.

Doubts over whether it was appropriate to set a single interest rate for the eurozone's divergent economies also undermined confidence in the singe currency.

The smoother than expected introduction of euro notes and coins in January this year did little to allay investors' concerns.

Sterling up

The euro's rally follows a surge in the value of the yen against the dollar earlier this week.

The Bank of Japan, concerned that Japanese exports would lose their competitive edge, quelled the rally by selling yen earlier on Wednesday.

The pound had also strengthened against the dollar late on Wednesday, climbing to $1.4582 from $1.4594 24 hours previously.

See also:

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