Dollar edges up against euro in European trading

FRANKFURT, Germany - The dollar rose Thursday against the euro after new reports showed eroding business confidence in Germany and France, the euro zone's biggest economies, amid pessimism over economic prospects.

The 15-nation euro bought $1.5666 in late European trading, down from $1.5681 in late New York trading Wednesday.

A survey released Thursday showed business confidence hitting a near three-year low in Germany. Meanwhile, business confidence in France slid to its lowest level since May 2005 as businesses reported rising inventories, falling orders, and higher expectations of inflation.

In Germany, the Munich-based Ifo institute's business climate index fell to 97.5 points in July from 101.2 points in June, dragged down by concerns over weakening business in the next six months. It was a steeper decline than analysts had expected.

"In manufacturing the business climate index has fallen noticeably," Ifo president Hans-Werner Sinn said of the results.

Andreas Rees, an economist at UniCredit said the trend was not reassuring.

"The Ifo index is now falling like a stone and the worst might be yet to come," he wrote in a research note, blaming high oil prices cutting into consumer purchasing power and slowing exports — a key motor of the German economy.

France's official statistics agency Insee reported that business confidence fell to 98 in July from 101 in June. A reading of 100 represents the index's long-term average.

"Given the industrialists' outlook for their own production, business will continue to slow down over the coming months," Insee said.

In other currencies, the British pound dropped to $1.9827 from $1.9976 late Wednesday after a report showed that U.K. retail sales fell in June by 3.9 percent, its biggest decline in 22 years.

The dollar bought 107.56 Japanese yen, compared with 107.93 late Wednesday in New York.

"Thursday's currency trading looks like a contest of which currency has the worst economic fundamentals," said Ashraf Laidi, a currency strategist at CMC Markets. He said the euro and sterling all fell "against the U.S. dollar and the Japanese yen due to fresh evidence of deteriorating economic data."

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