By Jeremy Gaunt, European Investment Correspondent
LONDON, March 6 (Reuters) - The dollar sank to a new record
low against the euro beyond $1.53 on Thursday, helping drive
gold to an all-time high and rattling equity investors worried
about the competitiveness of European companies.
Japanese shares earlier gained nearly 2 percent, however.
Focus was on the European Central Bank, which was expected
to keep interest rates steady at a meeting later in the day.
Higher rates in Europe over the United States, which is easing
monetary policy, are a main driver of euro strength.
"There are pretty clear expectations for a widening in
interest rate differentials, keeping the dollar at a
disadvantage," said Tomoko Fujii, head of economics and strategy
for Japan at Bank of America in Tokyo.
The euro <EUR=> rose as high as $1.5345, a new record. The
dollar also fell to a record low of 73.119 against a basket of
six major currencies <.DXY>. It was down 0.6 percent at 103.43
yen <JPY=>.
Besides responding to interest rate differentials
[], investors are dumping the dollar as a raft of U.S.
data comes in pointing to economic contraction.
The Institute for Supply Management's non-manufacturing
index for February beat expectations on Wednesday, but still
showed the service sector shrank for a second straight month
[].
ADP Employer Services also said on Wednesday that the U.S.
private sector cut 23,000 jobs in February, stirring worries
that U.S. jobs data due on Friday could come in weak.
The shrinking dollar, in the meantime, is helping boost gold
by making it cheaper for non-U.S. investors.
Spot gold <XAU=> was around $990 an ounce after hitting
$991.90, the highest it has even been on a non-inflation
adjusted level. It is within reach of the key psychological
level of $1,000 an ounce.
COMPETITIVENESS
With the soaring euro threatening the competitiveness of
European exporters, European stocks came under pressure again.
They managed to close higher on Wednesday, but this was their
first up day after five straight losses.
The FTSEurofirst 300 index <> of top European shares
was down 0.8 percent after rallying 1.7 percent a day earlier.
Banks were the worst drag on the broader market, as
persistent concern over the slowing U.S. economy and nervousness
ahead of the ECB meeting.
"The main trigger today will be Mr Trichet, what comments he
will give and what he will say on inflation and ... growth,"
said Heinz Gerd Sonnenschein, an equities analyst at Deutsche
Postbank in Bonn. He was referring to Jean-Claude Trichet,
president of the ECB.
Earlier, Japan's Nikkei average rose 1.9 percent on
Thursday, partly because the yen was stabilising yen and
Japanese exporters thus gaining.
The benchmark Nikkei average <> ended at 13,215.42, one
day after logging its lowest close since Jan. 23. The broader
TOPIX index <> added 1.9 percent to 1,287.55.
Euro zone government bond yields were little changed.
Two-year yields <EU2YT=RR> were 3.230 percent, while 10-year
yields <EU10YT=RR> were at 3.843 percent.
(Editing by Ruth Pitchford)
