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5/8/06

IHT: Euro's rise is linked to good news this time - by Carter Dougherty

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Euro's rise is linked to good news this time - by Carter Dougherty

After a roller-coaster year, the euro appears to be headed firmly on an upward track as Europe's once-sputtering economy starts firing on all cylinders and the U.S. dollar weakens against major currencies. A mixture of brisk exports and accelerating economic growth is persuading investors to take shelter in the euro as the dollar continues a relentless downward trajectory. The dollar's decline - which affects Asian currencies as well - has accelerated since the end of March as the huge U.S. current account deficit widens further, and the Federal Reserve signals that it may pause its 2- year long cycle of raising interest rates.

But while the euro has seen its rising fortunes fade in the past, things look different this time. Analysts say its fate is not tied solely to the dollar's whims. Rather, its renewed strength stems from a generally upbeat mood in Europe - one that is in stark contrast to even a year ago, when the collapse of the European constitution underscored deep uncertainty about the future of the Continent.

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