LONDON (AFP) - The euro resumed its march higher towards fresh summits against the dollar as markets waited anxiously for a US interest rate decision and trade deficit data.
The single European currency climbed Wednesday to 1.2926 dollars from 1.2897 overnight in New York.
The dollar fell to 105.94 yen from 105.65 on Tuesday.
A euro rally has stalled just short of the 1.30-dollar mark following a chorus of concern by eurozone officials, the latest being European Central Bank chief economist Otmar Issing in a newspaper interview published Wednesday.
Asked whether the ECB is concerned about the recent appreciation of the euro against the US dollar, Issing repeated president Jean-Claude Trichet's comments that recent developments are "brutal" and "unwelcome".
Markets were also cautious ahead of the Federal Reserve's US interest rate decision later Wednesday.
The American central bank was widely expected to raise the federal funds target rate by another 25 basis points to 2.0 percent. All eyes were turned to the Fed's accompanying statement and any hints of whether a further rate hike in December is on the cards.
Dresdner Kleinwort Wasserstein analysts said the market would be looking for any "subtle change" in the wording, particularly whether the Fed will retain the phrase that "policy accommodation can be removed at a pace that is likely to be measured".
The euro rose back above 1.29 dollars after earlier dropping below that level briefly, though the dollar was marginally higher against the yen, moving above 106 as the market remained cautious about the possibility of Japanese intervention to prop up the US currency.
Steve Pearson, currency analyst at HBOS, said continued falls in the dollar were being stemmed by the presence of "significant options barriers" at the key level of 1.30 dollars per euro.
Although the market remained concerned about the size of the US current account deficit, several factors are a positive for the dollar at the moment -- the continued fall in the oil price, a rise in US bond yields and firmer equities, he said.
Pearson noted, however, that the correction in oil prices comes "too late to alleviate the downside risks" to US trade deficit figures for September due later Wednesday.
The deficit, which rose to 54 billion dollars in August, was expected to be swelled by another large increase in the value of oil imports.
The euro was changing hands at 1.2926 dollars from 1.2897 late on Tuesday in New York, 136.94 yen (136.29), 0.6951 pounds (0.6941) and 1.5240 Swiss francs (1.5260).
The dollar stood at 105.94 yen (105.65) and 1.1793 Swiss francs (1.1829).
The pound was at 1.8592 dollars (1.8576), 196.96 yen (196.25) and 2.1926 Swiss francs (2.1976).
On the London Bullion Market, the price of an ounce of gold stood at 433.90 dollars against 433.35 late on Tuesday.
11/10/2004 - 12:06 GMT - AFP