US rates rise knocks sends euro reeling again

Just when you things are looking up for the euro something else comes along to knock it off track. Only last week, economists were talking up the prospects for the new European currency on the back of improving economic fundamentals in some of the zone's powerhouse economies, particularly Germany.

To be fair the latest setback was always on the cards. US Federal Reserve chairman Alan Greenspan had made it clear that the Fed's open market committee was going to raise rates. the only question was by how much. In the event, the quarter point increase together with a switch in monetary policy bias to stable from tightening was less damaging than some had feared.

With higher interest rates, it was inevitable there would be some flows from the euro to the dollar. The likelihood of no further increases for some time should at least minimise this trend to the benefit of the euro.