Euro pushes above $1.28 for first time in 2 months

Euro pushes above $1.28 for first time in 2 months

LONDON — The euro moved above $1.28 for the first time in over two months Thursday as the dollar was weighed down by renewed concerns about the U.S. economic outlook.

By early afternoon London time, the euro was up 0.7 percent at $1.2822, after earlier reaching $1.2834. That was the highest level since May 11 in the aftermath of the EU-led financial support package for the eurozone.

The 16-country currency is now around 10 U.S. cents higher than it was just a month ago — on June 7, the euro fell to a four-year low of $1.1878. The euro has regained some of its poise as investors have begun to include the apparently faltering U.S. economic outlook among their concerns, along with the heavy levels of debt weighing down European government finances.

That concern was evident Wednesday in a fairly downbeat assessment of the U.S. economy from rate-setters at the Federal Reserve.

The minutes to the last meeting of June 22-23 showed that Fed officials thought the economic outlook had “softened” and that further steps to boost the U.S. economy may be necessary — the Fed is now forecasting U.S. economic growth of 3.0-3.5 percent this year, against the 3.2-3.7 percent range predicted in April.

Investors now think the Fed is in even less of a hurry to raise interest rates and that many of the extraordinary monetary measures introduced to cope with the financial crisis may be in place for much longer than previously anticipated.

“As a result the dollar has continued to lose ground against a basket of currencies on the back of lower yields,” said Michael Hewson, an analyst at CMC Markets.

The minutes came in the wake of a bigger than expected 0.5 percent monthly fall in U.S. retail sales in June.

U.S. retail figures are particularly important because they shine a light on the state of consumption in the United States , a key driver of growth. U.S. retail spending accounts for around 70 percent of the world’s largest economy.

More U.S. data due later Thursday, in particular industrial production figures for June, will be eyed to see if they also point to slowing growth.

The euro has also been supported Thursday by the news that Greece’s private Piraeus Bank said it is offering to buy stakes in state-controlled ATEbank and Hellenic Postbank from the government for euro701 million ($890.5 million).

Chief executive Michalis Sallas said the bank is bidding to acquire 77.3 percent of ATEBank and 33 percent of Postbank.

The move follows public statements by government officials that Greek banks are likely to merge due to the country’s acute financial crisis and comes just days ahead of the EU’s bank stress test results.

“Allowing weaker banks to be absorbed could reduce the risk of bank failure and provide an alternative to government support,” said Jane Foley, research director at Forex.com.

Despite the dollar’s easing over the last few weeks, investors are making it clear that the euro’s recovery could well stall and reverse should the government debt crisis intensify again.

In the current environment, the U.S. currency will likely continue to remain supported by its widely considered status as a safe haven asset. That status may become more visible next week in the run-up to the stress test results.

Elsewhere, the British pound edged up Thursday to $1.5264 from $1.5253. The dollar was down to 88.10 Japanese yen from 88.28 yen.