Euro two-year high against dollar

THE euro smashed through the 98 US cents barrier for the first time in more than two years and set a fresh 30-month high against the pound as the single currency continued its astonishing recent rally. Many traders now expect the euro to level with the dollar within weeks, having seen it surge in the past fortnight.

While the euro gained ground against the dollar and sterling, the pound set 17-month highs against the dollar amid continued worries about the US economy. Another grim day for the greenback came despite intervention in currency markets by the Bank of Japan to support the dollar against the yen. 'The problem is, the Bank of Japan is the only buyer of dollars in the world,' said Commerzbank currency strategist Nick Parsons.

Amid concerns that the yen's renewed strength against the dollar would hurt exports, Japan's central bank spent between $3bn and $4bn buying dollars. A month ago, it spent about $15bn on intervention but the effect was short term.

The dollar fell to 98.16 cents to the euro before making a modest recovery after closing on Friday at 97.10. The pound hit new highs of $1.5084 and fell to 65.09p to the euro. The dollar rose to 122.8 yen from an earlier low of 121.02 yen.

The Office for National Statistics said Britain's public sector finances swung back into the red last month, reporting a public sector net cash requirement of £2.64bn for May following the previous month's surplus of nearly £3bn.