Euro close to a 3-Week High (Bloomberg) (03-01-2008)

Jan. 3 (Bloomberg) - As investors are awaiting a German report today that may show lower than expected unemployment, the euro is trading close to its the highest in three weeks against the dollar.

It could rise further against the dollar on speculation rising oil prices will quicken inflation, giving the European Central Bank more reason to increase interest rates.

The euro traded at $1.4710 as of 8:26 a.m. in London from $1.4715 yesterday in New York, when it reached $1.4750, the highest since Dec. 11. It rose to $1.4967 on Nov. 23, the strongest since the currency's introduction in 1999. The euro may rise to $1.4750 today, Yamamoto forecast.

Against the U.S. dollar, the British pound traded at $1.9786 from $1.9808, the Swiss franc was at 1.1173 from 1.1195 and the Canadian dollar traded at 99.34 Canadian cents from 99.37. Crude oil reached a record $100 a barrel yesterday.

The euro may snap four days of losses versus the yen as Germany's Federal Labor Agency may say at 9:55 a.m. in Nuremberg that the jobless rate fell to 8.5 percent last month, the lowest since April 1993. The euro was at 161.30 yen from 161.40 yen.

Meanwhile, the U.S. dollar slipped 0.1 percent to 109.52 yen after touching 109.22 yen, matching the one-month low set yesterday. The Australian dollar fell 0.4 percent to 96.50 yen, and the British pound dropped 0.1 percent to 216.79 yen.

Japan's currency headed for six days of gains versus the dollar, its longest stretch in three years, before reports that may show U.S. unemployment increased, bolstering speculation the world's biggest economy is losing momentum.

The yen may strengthen to 106 per dollar and 153.70 per euro at the end of March, Harr forecast. Financial markets in Japan were closed today because of a public holiday.

The dollar weakened as the outlook for the U.S. economy deteriorated, spurring traders to increase the odds of a Federal Reserve rate cut this month to 100 percent.

The chance the Fed will lower the federal funds rate by a further quarter point to 4 percent at its Jan. 30 meeting was 76 percent, while there's 24 percent odds of a reduction to 3.75 percent, according to futures contracts on the Chicago Board of Trade. The probability a week ago was 76 percent for a quarter- point cut and zero for a half-point.

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