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Dollar falls against euro as IMF raises forecast

The dollar fell to a two-month low against the euro today after the International Monetary Fund raised its forecast for global economic growth this year.

business Updated: Jul 08, 2010 21:32 IST

The dollar fell to a two-month low against the euro on Thursday after the International Monetary Fund raised its forecast for global economic growth this year.

The US currency rose against the Japanese yen and the British pound but gave ground against most other major currencies as traders reassured by the IMF's report bought riskier assets. The euro rose even as the European Central Bank chief warned that GDP in the 16 countries using the common currency will grow "at a moderate and still uneven pace."

The IMF said the economy worldwide is recovering faster than expected, even though Europe must still deal with its debt crisis and keep it from infecting other regions of the world. In morning trading in New York, the euro rose to $1.2687 from $1.2650 late Wednesday. It earlier peaked at $1.2694, its strongest level since May 12.

Fear of surging public debt and slowing growth have hurt the euro this year, dragging it down more than 15 percent versus the dollar, but it has been helped recently by hopeful signs on banks' health. Bank regulators will make "stress tests" of European financial institutions public on July 23 to try to relieve fears of a hit to balance sheets from deteriorating economic conditions. The ECB on Thursday held interest rates at 1 percent, while the Bank of England maintained a 0.5 percent rate. Both decisions were expected.

Increasing interest rates can help attract investors to a country's currency, boosting its value.

In other trading Thursday, the British pound slipped to $1.5152 from $1.5205, while the dollar rose to 88.58 Japanese yen from 87.40 yen.

But the US currency was mostly lower across the world. The dollar fell to 1.0501 Swiss francs from 1.0514 francs and to 1.0404 Canadian dollars from 1.0490 Canadian dollars.

The dollar also dropped against the Australian and New Zealand dollars, the Scandinavian currencies, the Korean won and the Brazilian real and Mexican peso.

US indicators were mixed. While the Labor Department said that fewer people filed for jobless aid last week, the total number of people requesting unemployment benefits remains above the level found in a healthy economy.

Many retailers also said revenue growth in June was modest as consumers remain wary of spending heavily.