(Updates prices, adds comment)
By Steven C. Johnson
NEW YORK, April 16 (Reuters) - The euro vaulted to a
lifetime peak against the dollar on Wednesday as record high
euro zone inflation and a sharp slide in U.S. home construction
highlighted the divergent growth paths of the two economies.
The euro rose to $1.5977 <EUR=>, according to Reuters data,
its strongest since its 1999 launch, as data showing a record
3.6 percent advance in euro zone prices last month suggested
the European Central Bank won't cut interest rates soon.
The outlook for the Federal Reserve was quite different,
especially after reports showed a sharp slide in U.S. March
housing starts and unexpectedly low consumer price inflation.
For more see [] []
"Relative inflation rates and their policy implications is
the theme of the day and is leading the euro charge toward
$1.60," said Alan Ruskin, chief international strategist at RBS
Greenwich Capital in Greenwich, Connecticut.
The Fed has already cut benchmark U.S. rates 3 percentage
points since September and is widely expected to cut them
again, to at least 2 percent, in late April.
Meanwhile, euro zone interest rates have been at 4 percent
for more than a year.
The euro last traded at $1.5965, up 1.1 percent from late
Tuesday, while sterling rose 0.6 percent to $1.9747 <GBP=>.
Strategists at CitiFX wrote in a note to clients that the
euro's break to a new record high may signal sustained dollar
weakness across the board.
Elsewhere, the greenback was changing hands at 101.45
Japanese yen <JPY=>, off a session low of 100.83 yen, but still
down 0.3 percent on the day.
It also fell 0.8 percent to 0.9988 Swiss franc <CHF=> and
weakened more than 1 percent against the Canadian <CAD=> and
Australian <AUD=> dollars.
A report showing an 11.9 percent plunge in housing starts
last month, while just the latest in a steady stream of bleak
housing data, still managed to shatter the guarded optimism
that had been growing in markets of late, traders said.
"These housing starts suggest that the pace of decline is
intensifying, which is the last thing the U.S. economy needs
right now," said Stephen Malyon, senior currency strategist at
Scotia Capital in Toronto.
The mood could sour further for the dollar on Wednesday
should first-quarter earnings announcements from Coca-Cola
<KO.N> and eBay <EBAY.O> disappoint markets.
Earlier, JPMorgan Chase & Co <JPM.N>, the third-largest
U.S. bank, said its quarterly profit fell 50 percent in the
first three months of the year, while The Wall Street Journal
reported Merrill Lynch <MER.N> will post $6 billion to $8
billion in write-downs when it releases results on Thursday.
[]
"Some people think the worst of the banking problems is
behind us, but poor earnings and more write-downs could have a
hand in setting the market's direction," said Steve Barrow,
chief currency strategist at Bear Stearns in London.
A report showing U.S. industrial output rose 0.3 percent in
March, beating economists' forecast for a 0.1 percent decline,
had little impact on currency prices.
(Additional reporting by Lucia Mutikani in New York and Simon
Falush in London; Editing by Gary Crosse)
