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Dollar up as U.S. economy shines, Kosovo fester

NEW YORK: The dollar crawled higher against most currencies on Tuesday as traders bet America's booming economy will outpace global growth, especially if Kosovo's crisis further weakens the outlook for Europe.

For the third consecutive day tensions between NATO and Yugoslavia, which had already helped push Europe's single currency to two lifetime lows, buoyed the dollar.

Talk of a possible ceasefire briefly supported the euro but the mood soured again when U.S. President Bill Clinton rejected Yugoslav proposals to end the Kosovo crisis and said NATO would continue bombing Serbian forces.

"There is no growth potential in Europe and even if there should be a Kosovo ceasefire, the aftershocks from the floods of refugees from the region are going to create hardships and problems," said Sanwa Bank senior trader Jeffrey Yu.

In late trading, the dollar stood at 1.0717 per euro, up from 1.0734 on Monday while it traded at 120.38 Japanese yen, up from 120.28 on Monday.

Europe's already sluggish economic outlook grew still more pessimistic on Tuesday as the European Commission trimmed its 1999 forecast to 2.2 percent growth from 2.6 percent. It forecast that the continent's biggest economy, Germany, would expand by only 1.7 percent.

Meanwhile, America's red-hot economy showed further signs of strength as consumer confidence hit an eight-month high in March, pushing the Conference Board's index up nearly one point to 133.9.

As Europe's economy slips further into the doldrums, market speculation about an interest rate cut, possibly coming at the European Central Bank's April 8 meeting, heated up, dealers said. Eugenio Domingo Solans, Spain's member of the executive board, helped fuel the talk when he told a German newspaper the bank was ready to take all decisions.

In Washington, the Federal Open Market Committee left the 4.75 percent federal funds rate unchanged and gave no hints that credit needs to be tightened soon to safeguard the eight-year expansion from inflation pressures.

Dealers also applauded the U.S. stock market's performance, saying profit-taking after Monday's historic close above 10,000 had been expected but that the overall market still seemed strong even as the Dow Jones industrial average slipped.

"The fact that the big Dow stocks hung in there is another sign of U.S. economic strength," said Ed Solari, director of foreign exchange at Bank of Montreal.

There was little interest in the Japanese yen as traders said corporations were conducting last-minute book adjustments before Japan's fiscal year end on Wednesday.

In other trading, the British pound slipped to $1.6116 from $1.6157 while the dollar rose to 1.4903 Swiss francs from 1.4848. The dollar however slipped against the Canadian dollar to C$1.5119 from C$1.5137.-Reuters