LONDON (AFP) – The euro rose against the dollar here on Thursday as Germany said that its economy, the biggest in Europe, would grow far faster than expected in 2010, while sterling slumped on weak retail sales data.
The European single currency climbed to 1.4023 dollars from 1.3955 dollars late in New York on Wednesday.
Against the Japanese currency, the dollar fell to 81.01 yen from 81.12 on Wednesday.
The German economy will grow at a rate of 3.4 percent this year and then slow slightly in 2011 as global demand ebbs, Berlin forecast on Thursday, sharply raising forecasts for Europe’s top economy.
Output will expand by 1.8 percent in 2011, the government forecast. Its previous projections made in April were for growth of 1.4 percent and 1.6 percent respectively.
«Germany is again the growth motor of Europe. After a period in the fast lane, our economy is now in the overtaking lane,» Economy Minister Rainer Bruederle told a news conference.
«The recovery is standing solidly on two legs: after a strong push from exports, the domestic economy is now taking off,» he added.
The British pound meanwhile slid against the euro and dollar on Thursday as official data showed retail sales fell unexpectedly in September.
«Sterling nosedived to a six and a half month low against the euro and fell against the dollar this morning after soft retail sales data highlighted the weakening pace of economic growth in the UK,» said trader Mark Bolsom at Travelex Global Business Payments.
Analysts said the data heightened expectations of further stimulus measures from the Bank of England aimed at aiding the economic recovery after recession.
Elsewhere on Thursday, the dollar briefly surged against other currencies in Asian trade on speculation that US Treasury Secretary Geithner believes the greenback does not need to drop further.
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«The rally was ignited by reported comments by Geithner,» said Tsunemasa Tsukada, chief manager for forex sales at Mitsubishi UFJ Trust and Banking.
Geithner said in an interview with the Wall Street Journal that he considers major currencies are «roughly in alignment now», which spawned speculation that he sees no need for the dollar to weaken further.
But the dollar quickly lost steam with market players digesting the news.
«After all, the market realised it wasn’t so strong a message,» Tsukada said of the Geithner comment.
Dealers said the focus would likely remain squarely on the possibility of further credit easing by the US Federal Reserve at a policy-setting meeting on November 2-3.
«The bearish trend in the dollar is likely to persist,» a senior dealer at a major European bank told Dow Jones Newswires.
Tsukada said currency markets would be swayed by comments from government officials in the run-up to meetings of Group of 20 finance ministers and central bankers starting in South Korea on Friday and summit talks in November.
The weekend talks open amid fears of a «currency war» with countries seeking to guide their currencies lower for the sake of exports.
In London, the euro changed hands at 1.4023 dollars against 1.3955 dollars late in New York on Wednesday, at 113.61 yen (113.20), 0.8883 pounds (0.8804) and 1.3493 Swiss francs (1.3434).
The dollar stood at 81.01 yen (81.12) and 0.9623 Swiss francs (0.9623).
The pound was at 1.5786 dollars (1.5845).
On the London Bullion Market, the price of gold rose to 1,345.70 dollars an ounce from 1,339 dollars an ounce late on Wednesday.