The dollar notched up a five-month high against the euro Friday as eurozone growth fears mounted after Italy reported a contraction in its second quarter economic growth.The dollar's latest gains occurred after it had already picked up steam in the past week amid mounting jitters about major European economies, including the growth prospects for Germany, Europe's largest economy.
The single European currency was quoted at 1.5013 dollars around 2100 GMT, down from 1.5321 late Thursday. It had earlier, however, slumped as low as 1.4996, marking its lowest level against the dollar since February 26.The US currency meanwhile had gained against the Japanese currency to 110.11 yen, up from 109.46 a day earlier.
The update on Italy's economy added to a deepening sense of gloom about the eurozone following a slew of downbeat economic news relating to the 15-nation bloc.Italy is the first eurozone country to reveal figures for the second quarter and a 0.3-percent quarter-on-quarter contraction underlines fears that a severe slowdown, even a broad European recession, could be on the cards.
European Central Bank (ECB) president Jean-Claude Trichet, announcing unchanged interest rates on Thursday, acknowledged that the eurozone economy was showing signs of weakening, in comments that sent the euro into a tailspin.
"These are the first GDP (gross domestic product) figures to come out and they anticipate a general setback in Europe," said an analyst at French investment bank BNP Paribas, Caroline Newhouse-Cohen, referring to Italy's weaker growth figures.
"Even if Italy is suffering from a more unfavorable situation than Germany or France, we have every chance of seeing a contraction of about 0.3 percent or more, in the whole of the eurozone," she said."Even the German GDP, expected next week, is likely to show a fall of 0.8 percent," Newhouse-Cohen added.
A recession is typically defined as two consecutive quarters or more of economic contraction.Traders said the dollar also gained support as the US stock market rallied, as investors sensed that falling oil prices may relieve pressure on the American economy, which is struggling to shrug off a housing slump and a credit crunch.
The British pound remained under pressure after the Bank of England kept its key rate steady at 5.0 percent on Thursday in the face of slowing economic growth and high inflation.The pound was quoted at 1.9209 dollars, down from 1.9435 late Thursday.
Both the ECB and the US Federal Reserve had also kept their respective main interest rates unchanged this week at 4.25 and 2.0 percent respectively.In late New York trade, the dollar stood at 1.0816 Swiss francs, up from 1.0622