Foreign Exchange News

Euro Dips Briefly Below $1.20: "The euro fell briefly below $1.20 for the first time in 10 months on Friday...The euro has come under pressure from growing expectations of lower rates in the currency bloc this week after Sweden's aggressive rate cut and dovish Bank of England minutes.

Political pressure has mounted on the euro zone's central bank to do something about the region's struggling economy. The spectre of a break-up of European economic and monetary union has also raised its head in recent weeks after the French and Dutch ``no'' votes on the European Union constitution and the failure of EU leaders to settle on a long-term budget.

Analysts said the euro was also under pressure after U.S. drugmaker Pfizer said on Thursday it planned to repatriate $36.9 billion in overseas earnings, $8.6 billion more than previously announced, under the American Jobs Creation Act of 2004, which allows it to do so at a sharply reduced tax rate. Chinese oil firm CNOOC Ltd's $1.85 billion bid for Unocal Corp. could also be underpinning dollar strength.

China's yuan policy is set to be an ongoing topic in the next few weeks, with Group of Eight leaders meeting in Scotland on July 6-8. The euro fell sharply against the yen on Thursday after China's state-run Xinhua news agency reported that China's foreign exchange regime would likely be discussed when President Hu Jintao participates in the summit.

``The China story ebbs and flows but it will be a major theme in the second half and could undermine dollar strength,'' said Neil Mellor, currency strategist at Bank of New York."