Euro Advances versus US Dollar (AP) (01-02-2008)

BERLIN (AP) -- The euro gained slightly against the U.S. dollar on Friday, in the wake of weak economic data from Washington and a cut in American interest rates.

In morning European trading the euro was worth $1.4886, up slightly from $1.4877 in New York trading late Thursday. The British pound rose to $1.9909 from $1.9900 in New York, while the dollar dipped to purchase 106.34 Japanese yen from 106.43 the night before.

The dollar weakness comes after the reported consumer weakness by the U.S. Commerce Department which was up just 0.2 percent in December, down sharply from a 1 percent gain in November. Meanwhile, the U.S. Labor Department reported that unemployment benefits reached the highest level in more than two years.

Worries about U.S. bond insurers and continuing fallout from the subprime mortgage crisis also affected the market.

Currency traders' main focus recently, however, has been on interest rate moves from Europe and the U.S.

The Fed lowered its benchmark rate to 3 percent on Wednesday, its second cut in eight days, putting it well below the euro zone rate of 4 percent and Britain's 5.5 percent.

Lower rates can help jump-start a country's economy, but at the same time weaken a currency as traders transfer funds to assets where they can earn higher returns.

Source: AP