Dollar Gains on Euro After European Rate Decisions


Both the euro and the pound retreated against the U.S. dollar on Thursday, as the Bank of England cut interest rates and the European Central Bank appeared to leave the door open for an eventual reduction.

Dollar and Euro

The 15-nation euro was down against the dollar in late European trading, down from US$1.4628 in New York late Wednesday. The pound also dropped against the dollar.

In decisions widely anticipated by economists, the Bank of England lowered its key interest rate by a quarter point to 5.25 percent Thursday, while the European Central Bank left its benchmark rate unchanged at 4 percent.

The decisions came after the U.S. Federal Reserve cut rates by a total of 1.25 percentage points last month, amid fears of a possible recession.

Lower interest rates can jump-start a country's economy, but may weigh on its currency as traders transfer funds to countries where they can earn higher returns.

ECB President Jean-Claude Trichet appeared to hold the door open at least a crack for an eventual rate cut, noting that risks to growth in the euro zone were on the rise. Sentiment has grown among analysts that the ECB will have to cut rates later this year despite rising inflation.

Trichet said there was no talk on Thursday of either lowering rates or raising them _ an option the ECB has been keeping open.

In other trading Thursday, the dollar edged up to 106.75 Japanese yen from 106.58 yen.