MercoPress. South Atlantic News Agency

Euro soars to its highest against the US dollar

The Euro soared to its highest level against the US dollar since April 2005 amid concerns for the deceleration of the US economy and a significant slowdown in the housing market.

The euro reached 1.31 US dollars Friday after having closed Thursday at 1.29, with other currencies following suit: the Japanese Yen hit a two months high at 115.65; the British pound rose to 1.93 US dollars and Russia's ruble rose to a seven-year high.

Analysts recall that the US economy dropped from a 5.6% growth in the first quarter to 2.6% and 1.6% in the third quarter. Last Tuesday the White House downgraded growth forecasts for 2006.

Meanwhile, expectations that the European Central Bank is once again about to raise interest rates gave a lift to the euro. Recent figures showing an unexpected rise in German business sentiment - its seventh quarterly rise in a row - also helped. So did data from France showing that business confidence held at five-year highs in November.

However traders added that weak trade as a result of the US Thanksgiving holiday might have benefited the Euro.

If as anticipated the European Central Bank raises interest rates and will continue to do so in 2007 if inflationary conditions persist, the gap with US rates will narrow. Some analysts are forecasting the Euro could end 2006 at 1.34 US dollars.

The European joint currency was introduced as legal tender in January 2002.