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Dollar edges up against euro

LONDON - The dollar on Wednesday nudged up against the euro as the market monitored efforts by central banks to ease a credit crunch and after news that German business confidence fell in December, dealers said.

In morning European trade, the single European currency fell to 1.4401 dollars from 1.4416 in New York late on Tuesday.

The dollar dropped to 112.83 yen from 113.36.

“Traders in equity and currency markets are having a breather, taking a somewhat positive view towards (efforts to ease) the subprime problem,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

“Trade is also directionless because it is the end of the year ... with traders feeling tired after four months of turmoil” in global financial markets, he added.

The European Central Bank (ECB) on Tuesday allocated an unprecedented 500 billion dollars in the money markets in an effort to ease the squeeze buffeting the banking industry.

This came on the heels of a 20 billion dollar auction by the US Federal Reserve on Monday to encourage banks to borrow funds from the central bank at rates lower than those currently offered on the market.

On Wednesday, the market was also digesting news that business confidence fell by more than expected this month in Germany, the eurozone’s biggest economy.

In the closely watched business climate index, calculated each month by the Munich-based economic research institute Ifo, the December reading fell to 103 points from 104.2 points in November, when it had risen from 103.9 points.

Market forecasts had been for a December level of 103.5 points.

“Although the drop in the IFO is in line with the outlook for slower growth next year, the index remains well above its long term average, signalling no reason to panic,” Calyon economist Stuart Bennett said.

“The bearish (negative) nature of the data pushed the euro lower against the dollar,” he added.

In European trading on Wednesday, the euro changed hands at 1.4401 dollars, against 1.4416 late Tuesday, at 162.43 yen (163.43), 0.7175 pounds (0.7153) and 1.6597 Swiss francs (1.6604).

The dollar stood at 112.83 yen (113.36) and 1.1525 Swiss francs (1.1516).

The pound was at 2.0074 dollars (2.0147).

In London, the price of gold dropped to 802.30 dollars per ounce from 804.25 dollars late on Tuesday.