LONDON, Jan 18 (AFP) - The euro slid to a two-month low against the dollar here Tuesday as the US currency firmed on news that net capital inflows into the United States rose sharply in November, suggesting overseas investors were still willing to help finance the US current account deficit.
The single European currency in late-day trade was at 1.3042 dollars, down from 1.3077 late in New York on Monday.
The euro at one point fell below 1.30 dollars for the first time since November 23 but its later recovery was slowed by the data coming from Washington.
The dollar was meanwhile trading at 102.39 yen against 102 yen on Monday.
Total net capital inflows rose to 81 billion dollars in November from 48.3 billion in October. Foreign purchases of domestic securities increased to 99.7 billion dollars in November from 65.4 billion.
Foreign central banks also increased their purchases, buying 27.9 billion dollars of US assets, including 21 billion of Treasury securities, 3.5 billion of agency bonds, 1.9 billion of corporate bonds and 1.5 billion in equities.
"There had always been fears that the inflows won't be enough to cover the trade deficit, so the outcome proved supportive," said Gary Noone at Informa Global Markets.
There have been concerns in global financial circles that overseas investors, unnerved by the US current account and budget deficits, would one day abandon US securities, thereby prompting a sharp and sudden fall in the dollar and higher interest rates from the Federal Reserve.
While rates have lately turned higher, Fed policymakers insist that the increase will be "measured" and gradual.
Elsewhere, sterling remained one of the day's biggest gainers even though it lost some of its luster against the dollar.
At one point the pound gained more than one cent against the dollar after it was revealed that British inflation in December rose much faster than expected.
The pick-up in price pressures, which followed news that the housing market may be stabilising, dampened hopes of rate reductions in the months ahead.
"This upside surprise has eroded much speculation that the Bank of England has reached the end of its rate rises -- this is very positive for sterling," said Clyde Wardle at HSBC Bank USA.
At 1.6 percent, the annual rise in the British consumer price index in December was the highest since June 2004 and the third rise in as many months.
The euro was changing hands at 1.3042 dollars against 1.3077 late on Monday in New York, 133.52 yen (133.39), 0.6976 pounds (0.7028) and 1.5446 Swiss francs (1.5453).
The dollar stood at 102.39 yen (102.00) and 1.1842 Swiss francs (1.1817).
The pound was at 1.8697 dollars (1.8607), 191.44 yen (189.79) and 2.2141 Swiss francs (2.1989).
On the London Bullion Market, the price of an ounce of gold stood at 421.75 dollars against 422.25 dollars late on Monday.
01/18/2005 18:02 GMT - AFP