NEW YORK (AFP) - The euro remained strong against the dollar after nearing its record-setting mark amid US Federal Reserve chairman Alan Greenspan's hint that another depreciation in the US currency might be necessary to reduce the current account deficit.
At around 2230 GMT, the euro was trading at 1.3033 dollars after reaching 1.3067 dollars earlier in the day, nearly hitting Thursday's historic 1.3074 dollars mark. The dollar bounced back late Thursday as the euro was trading at 1.2961 dollars by the end of the day.
The dollar was trading at 103.20 yen Friday compared to 104.20 yen the previous day.
Mitul Kotecha, senior forex strategist at CALYON, said Greenspan's comments reinforced US Treasury Secretary John Snow's statement that the United States is not worried the dollar's decline.
"Greenspan gives no indication that he is concerned about the fall in the dollar and appears to indicate that as long as it is orderly, there will not be a problem, keeping faith in markets to make the adjustment," Kotecha said.
Greenspan deflated European hopes for coordinated central bank intervention to check the record-setting pace of the euro.
Speaking at a European banking congress in Frankfurt, the Fed chief said central bank intervention generally tended only to have a moderate impact.
"Large interventions ... do not create very large increases in exchange rates of a protracted nature," Greenspan said.
He pointed to recent action by the Bank of Japan as an example, saying that the impact "has so far been moderate."
That was because of the "high level of sophistication of the markets," which tended to dilute the impact of any interventions, Greenspan said.
Turning to the US current account deficit, which is one of the reasons behind the dollar's fall, Greenspan said he believed the shortfall could not be indefinitely supported by money from abroad.
The US current account deficit reached a record 166.2 billion dollars in the second quarter, with Japan and China the major buyers of US debt in recent years.
Greenspan, who has made repeated warnings that action will have to be taken to rein in the deficit, said current account imbalances were not an automatic problem.
But he added that "cumulative deficits which result in a marked decline of a country's net international investment position -- as is occurring in the United States -- raise more complex issues."
Greenspan said that for the moment the United States was seeing only "limited indications" of foreign resistance to financing the deficit.
"Yet net claims against residents of the United States cannot continue to increase forever in international portfolios at their recent pace.
"Net debt service cost, though currently still modest, would eventually become burdensome," he said.
In late New York trade, the dollar stood at 1.5123 Swiss francs from 1.5171 Thursday.
The pound was at 1.8557 dollars from 1.8496 the previous day.
11/19/2004 - 23:48 GMT - AFP