Euro tests 85 cents level on back of weaker American growth figures

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The Independent Online

The euro climbed above 85 cents against the dollar for the first time in two weeks, staging what some analysts said could mark the beginning of a longer-term recovery.

The euro climbed above 85 cents against the dollar for the first time in two weeks, staging what some analysts said could mark the beginning of a longer-term recovery.

Although the single currency subsided back to trade around $0.8430 later in the afternoon, it remained nearly a cent higher on the day and two cents above the record low of $0.8225 it reached last week.

Friday's figures showing growth in the US has slowed more rapidly than expected, from 5.6 per cent in the second quarter to 2.7 per cent in the third, helped explain the euro's tentative recovery. The US Federal Reserve is expected not to raiseinterest rates further, whereas the European Central Bank is firmly expected to raise its key lending rate again before long.

Hans Eichel, Germany's finance minister, said yesterday the exchange rate was "economically unfounded". In a speech to the Swiss-German chamber of commerce, he said: "Now the European economy is growing faster than that of theUS, the markets should recognise the euro/dollar rate is no longer economically justified."

Traders remained alert for intervention by central banks to buy euros and push up the exchange rate. Joint intervention on 22 September took them by surprise and sent the currency, briefly, up to $0.90.

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