Euro Rises Against Dollar on Weber's Comment, Crude Oil Gain

By Ye Xie and Gavin Finch

Aug. 27 (Bloomberg) -- The euro rose versus the dollar as European Central Bank council member Axel Weber said there's no scope for interest-rate cuts and crude oil prices increased for a third straight day.

The U.S. currency fell against the yen on concern credit- market losses will widen after the Federal Deposit Insurance Corp. said the number of problem banks increased to the most in five years. The dollar pared its losses against the yen and the euro as a government report showed orders for durable goods unexpectedly rose last month.

``The euro is getting some support from Weber,'' said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``Clearly we are not likely to see a rate cut in the near future.''

The euro climbed 0.5 percent to $1.4731 at 8:37 a.m. in New York, from $1.4653 yesterday, when it touched $1.4571, the lowest level since Feb. 14. The dollar fell 0.1 percent to 109.45 yen, from 109.60. The euro advanced 0.3 percent to 161.16 yen, from 160.64.

The 15-nation euro has fallen 8 percent from a record high of $1.6038 set on July 15 as the European economy shrank in the second quarter and crude oil declined 20 percent from its all- time high reached last month. The euro depreciated yesterday to a six-month low after a report showed German business confidence dropped in August to the lowest level in three years.

`Premature' Discussion

Discussion about a cut in the ECB's 4.25 percent main refinancing rate is ``premature,'' Weber said in an interview in Frankfurt. Policy makers may need to raise borrowing costs once the economic outlook ``brightens'' toward the end of the year and next year, he said.

Bookings for U.S. goods made to last several years increased 1.3 percent in July after a revised gain of 1.3 percent in the previous month, the Commerce Department said today in Washington. The median forecast of 76 economists in a Bloomberg News survey was for no change in durable goods orders.

Personal spending rose 0.2 percent, less than half the 0.6 percent increase in June, a report is forecast to show Aug. 29.

Federal Reserve policy makers agreed that their next move will be a rate increase, although they didn't indicate the timing, minutes of their Aug. 5 meeting showed yesterday.

Futures on the Chicago Board of Trade show a 17 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by at least a quarter-point in December, compared with 70 percent odds a month ago. Policy makers next meet Sept. 16.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net;

Last Updated: August 27, 2008 08:42 EDT