Currencies: Fears over weak euro lift dollar to dizzy heights

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The Independent Online
The dollar rose against most European currencies amid speculation that political and economic developments in France and Germany will lead to a weak euro - the planned single European currency.

French voters choose their next government today and a Socialist-led coalition may win. While the Socialists are committed to EMU, they want the economic requirements for admittance to be eased. The German government and the Bundesbank are also fighting over how to meet the criteria.

"The market is pushing the dollar higher against the mark because the turmoil surrounding EMU is leading people to prefer dollar assets," said Keisuke Aso, manager of foreign exchange at Bank of Tokyo-Mitsubishi.

The dollar rose to 1.7069 marks and climbed to 5.7573 French francs and to 1,697 Italian lire from 1,685 lire. The dollar was little changed at 116.25 yen from 116.28 yen. For the week, the dollar gained 0.7 per cent against the mark and 0.5 per cent against the yen.

The dollar has been volatile since the French left-wing out- polled the right in the first round of elections last Sunday. The dollar also has been whipsawed by a spat between the German government and the central bank over whether to increase the recorded value of the country's gold reserves to meet the debt requirement for EMU.

That conflict has led some traders to question whether the union will begin on time. Signs of delay generally help the mark, as it is expected to remain Europe's leading currency until the euro is introduced. Copyright: IOS & Bloomberg