2008.12.1612:40:00UTC+00Euro Adds To Gains Versus Dollar, Pound

The euro gained on other major currencies again on Tuesday, adding to long-term highs against the dollar and sterling. The European currency also lingered close to a near-term high against the yen.

The euro extended its 2 1/2 month high against the U.S. dollar as an expected interest rate cut by the Federal Reserve will widen the interest rate gap between the US and EU. The Fed is expected to cut rates by 50 basis points this afternoon. The European currency jumped to 1.3831 in the early afternoon.

On Monday, Goldman Sachs lowered its U.S. dollar outlook against the euro to $1.45, compared to the prior forecast of $1.30.

Once again, the euro extended its record high against the British pound. The European currency rose as high as 0.9030, a day after topping 0.9000 for the first time ever. Tuesday in the UK, the Office for National Statistics said annual inflation fell to 4.1% in November from 4.5% in October, thanks to falling fuel prices.

The euro remained near a three-week high against the Japanese yen, climbing to 124.51. Against the Swiss franc, the euro turned lower and moved at 1.5759.

On the economic front in the Eurozone, the composite index of the purchasing managers' survey conducted by Markit Economics dropped to 38.3 in December from 38.9 in November. The December reading is the lowest since the survey began in 1998. Economists were looking for a reading of 37.8 for December.

Meanwhile, the Eurostat announced that the Eurozone employment declined 0.1% quarter-on-quarter to 80,000 persons in the third quarter, in contrast to the 0.2% rise recorded in the previous quarter.

Late Monday night, European Central Bank President Jean-Claude Trichet said exceptional interventions aimed to alleviate the tensions in the money market would not compromise the longer-term achievement of price stability in line with the inflation target of less than 2%, but close to 2%.

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