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FX round-up: Dollar at 6-month high against euro

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Date: Wednesday 27 Aug 2008

LONDON (ShareCast) - The dollar gained against the euro Tuesday, rising to a six-month high, after another batch of weak European economic data.

Research firm GfK cut its forecast for German consumer sentiment in August while a separate report looking at business confidence in Europe’s largest economy came in weaker than predicted.

The dollar rose after the release of minutes from the Federal Reserve’s last rate setting meeting, which indicated concern over inflationary risks. "Although downside risks to growth remained, they appeared to have diminished somewhat, and the upside risks to inflation and inflation expectation increased," the minutes said.

Tuesday also saw the release of the Conference Board’s US consumer confidence report. It showed a rise in August although concern about unemployment took the shine off the otherwise upbeat report.

Another key report showed sales of new US homes rose unexpectedly in July, according to the Commerce Department, while house prices fell.

The relatively good US data propped up the dollar while the euro, yen and sterling suffered as data indicates that the rest of the world is catching up with the US economic slowdown, analysts said.

Sterling fell after the downbeat German economic data as concern creeps in about future trading demand with the euro zone.

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