LONDON: The dollar climbed against the euro and yen on Wednesday, supported by hopes that the worst of the credit crunch is over, and on the eve of a rate decision by the European Central Bank, dealers said. Elsewhere, the European Commission on Wednesday gave Slovakia the green light to adopt the euro, setting the ex-communist country on a path to become next January the 16th eurozone country. In European trade, the euro fell to $1.5470 from $1.5530 in New York late on Tuesday. The dollar gained to 105.28 yen from 104.75. The US currency was supported by market optimism that the credit crunch is starting to ease to some extent, said Kenichi Yumoto at Societe Generale. US mortgage finance giant Fannie Mae reported on Tuesday a net loss of $2.19 billion (?1.42 billion) and announced plans to raise fresh capital, but executives also voiced hopes of an easing of the credit crunch. The dollar s gains were capped by jitters about crude oil prices, which hit a new record high at $122.73 per barrel on Tuesday. The British pound was also in focus ahead of an interest rate decision from the Bank of England on Thursday, although no policy change is expected given inflation concerns. The BoE was expected to hold borrowing costs at 5 percent while the ECB is set to keep eurozone rates at 4 percent, according to economists. Ahead of the ECB decision, official data released on Wednesday showed consumers in the 15 nations sharing the euro had reined in spending during March, confounding expectations that they would keep their wallets wide open despite a weakening economy. The volume of retail trade in the eurozone fell O.4 percent in March from February and slumped 1.6 percent over 12 months, the European Union s Eurostat data agency said. Although consumer confidence has softened lately it remains much stronger than in the US or the UK, said Capital Economics analyst Jennifer McKeown. Meanwhile the ECB said on Wednesday that Slovakia fulfilled all the criteria to adopt the euro on January 1, 2009, but expressed considerable concerns about inflation in the country. The central bank said in a convergence report that annual inflation had been rising in recent months in Slovakia, reaching 3.6 percent in March. There are considerable concerns regarding the sustainability of inflation convergence in Slovakia, it said. The ECB said tight labor market conditions in Slovakia and rising energy prices could aggravate the problem. In London on Wednesday, the euro changed hands at $1.5470 against $1.5530 late on Tuesday, at 162.90 yen (162.68), 0.7904 pounds (0.7869) and 1.6320 Swiss francs (1.6335). The dollar stood at 105.28 yen (104.75) and 1.0546 Swiss francs (1.0515). The pound was at $1.9577 (1.9735). On the London Bullion Market, the price of gold fell to $873 per ounce from $880 late on Tuesday.
