Dollar's gain against euro calms fears

Washington -- The U.S. dollar's six-year decline against the euro may have hit a turning point in recent weeks, several economists said.

The dollar skidded to $1.60 against the euro two weeks ago, but has since gained ground, closing at $1.55 late Tuesday, The New York Times reported.

The dollar's turnaround could be triggered by the U.S. Federal Reserve's recent statement indicating a reluctance to cut interest rates further, the Times said.

The Fed cut key lending rates to 2 percent on April 30, but said it would "pause" before cutting rates further.

At the Fed, "the balance is shifting toward a little more concern about the dollar," former director of monetary affairs at the central bank Vincent Reinhart told the Times.

Currency balances also carry political implications. While European leaders have expressed concern that the dollar's weakness creates a trade imbalance -- with European goods costing more in the United States -- the Bush administration is reluctant to apply the same standards against China's currency.

A rate of exchange that keeps Chinese goods costing more checks China's ability to flood U.S. retail markets and has helped reduce the call for trade sanctions against China, the report said.

Copyright 2008 by United Press International.