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12/30/06

FXSWtreet.com: Euro Rallies on Rate Outlook

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Euro Rallies on Rate Outlook

The euro rallies across the board with rising bets on a rate increase by ECB in the first quarter of next year. The euro tested 1.32 versus the dollar, and rose to a record high at 165.71 against the yen.

The European Central Bank policy board member Yves Mersch said the current interest rates are still low. It is widely expected that the ECB will lift interest rates from 3.5% to 3.75% in the first quarter of 2007. Compared with a possible rate cut by the Fed and a unknown chance of rate increase by the Bank of Japan, the clear ECB rate hike outlook gives the euro a good support in the light trading before year end.

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