The New Nation - Internet Edition

AFP, Tokyo

The euro edged higher against the dollar in Asian trade on Friday amid skepticism about the chances of an interest rate cut in the eurozone despite worsening business confidence, dealers said. The euro rose to 1.5694 dollars in Tokyo afternoon trade from 1.5685 in New York late on Thursday, while slipping to 163.36 yen from 163.50.

The dollar dipped to 104.10 yen from 104.22.

Currency speculators moved to take profits after driving the euro lower a day earlier in response to a much weaker than expected German business survey, said Hideaki Inoue, head of forex trading at Mitsubishi UFJ Trust and Banking Corp.

The Ifo research institute said its April business climate index for Germany fell to 102.4 from 104.8 in March, well below forecasts of a decline to 104.3.

ECB President Jean-Claude Trichet said Thursday that the euro's surge earlier this week to record levels "could hurt the European economy."

The soft data rekindled talk of a possible interest rate cut by the European Central Bank (ECB) in the coming months, but analysts said that stubborn inflation would make it hard for the ECB to loosen monetary policy.

"If oil prices fall then the ECB will have more room to cut rates. But until then it is difficult for it to move in either direction," said Inoue.

The euro's gains were capped by speculation that the US central bank might soon halt its series of interest rate cuts, possibly after one more 25 basis point reduction next week.

Confidence has been recovering on world stock markets recently as investors hope for a rebound in US economic growth later this year despite massive losses by major US banks on mortgage-backed securities gone sour.

Against regional currencies, the dollar rose to 1.3588 Singapore dollars in late Asian trade from 1.3513 a day earlier, to 994.40 South Korean won from 994.00 and to 31.62 Thai baht from 31.51.

It climbed to 30.33 Taiwan dollars from 30.30, to 42.07 Philippine pesos from 41.96 and to 9,222.50 Indonesian rupiah from 9,217.5.