Euro strength may continue on steady rates outlook (Reuters) (18-04-2008)

LONDON, April 18 (Reuters) - The euro was close to a record high against the dollar on Friday on the belief that the strong inflation data from Germany will stop the European Central Bank from lowering interest rates any time soon.

German producer prices in March increased 0.7 percent month-on-month and 4.2 percent for the year, above expectations and keeping pressure on the ECB to hold rates at 4 percent while the U.S. Federal Reserve is seen as cutting rates further from the current 2.25 percent.

By 0908 GMT, the euro was up 0.3 percent at $1.5950, less than half a cent away from a record high set the previous session.

The dollar was little changed at 102.45 yen <JPY=>. Some analysts think a return to confidence in markets will limit the yen's rise.

According to analysts, the March euro zone inflation rate was revised up to an annual 3.6 percent this week, a record high. That means the ECB will probably not lower rates for a while and will tolerate rises in the euro to some extent.

The dollar index is currently trading at 71.4 and ING targets it fall to 71.0 .DXY.

SourceReuters