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NEW YORK: The dollar came under fresh pressure Thursday as comments from the European Central Bank sparked volatile trade and positive US corporate news fueled a move to riskier assets.
The euro rose to 1.4791 dollars at 2100 GMT against 1.4689 late Wednesday in New York. The single currency at one point bounced briefly above 1.48 dollars, not far from its 12-month high last month.
The dollar was meanwhile weaker against the Japanese currency, falling to 88.39 yen from 88.60.
Choppy trade followed comments from European Central Bank president Jean-Claude Trichet, who said the economic storm lashing the eurozone economy was abating. The ECB earlier had held its key interest rate at 1.0 per cent.
The ECB action "has triggered a tremendous amount of volatility in the euro-dollar rate," said Kathy Lien at Global Forex Trading.
"Initially the currency pair raced to a high of 1.48 as the optimistic comments from ECB president Trichet and lack of new concerns on the euro reinforce the recovery story," she said.
"However just as quickly as it had rallied, the euro gave back all of its gains in a move that is characteristic of the confusion in interpreting the ECB's stance."
Trichet called attention to what he said was the importance of a recent statement by US Treasury Secretary Timothy Geithner supporting a strong dollar.
Although Trichet's comments helped the greenback steady, Michael Malpede at Easy Forex said that "the dollar is likely to continue to weaken unless there is a credible threat of coordinated intervention or the Fed (Federal Reserve) signals the potential for a rate hike."
The US currency in recent days has wobbled on indications its pre-eminence in international financial transactions is coming under sharp scrutiny.
This has sparked a rush into gold, which has hit all-time record highs this week. The New York gold price jumped to a new high of 1,058.48 dollars on Thursday.
The United States is suspected in some quarters of preferring to allow its currency to slide in order to boost the competitiveness of US exports and help a fragile economic recovery.
Analysts said at least three Asian central banks had intervened in currency markets earlier Thursday to stem the decline of the dollar.
Joseph Brusuelas at Moody's Economy.com said the central banks of South Korea, Taiwan and the Philippines "each purchased dollars in an effort to lessen competitive pressure on their export industries from a devalued greenback."
"The export-driven economies of Asia are particularly sensitive to movements in the dollar," he added.
Investors were also emboldened by news that US aluminum group Alcoa unexpectedly returned to profit in the third quarter, seen as heralding good news from other US corporate giants that will report their results next week.
The positive earnings surprise "should remind the market that although there are significant longer term risks out there on the horizon, we are still at the beginning of an economic recovery," said Sacha Tihanyi at Scotia Capital.
"It is also still natural to question the extent of easy gains left to be made as many currencies trade closer to previous top of the cycle highs against the dollar," he added.
In late New York trade, the dollar stood at 1.0260 Swiss francs from 1.0329 Wednesday.
The pound was at 1.6068 dollars after 1.5956.
- AFP/yb
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