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Dollar Ends Higher as U.S. Economy Shines
By Chris Stetkiewicz  Reuters
NEW YORK — The dollar rose for a fifth straight day against the Japanese yen Friday and reached its best level yet against the seven-week-old euro as the U.S. economy continued to comfortably outperform the rest of the world.

Japanese officials remained indifferent to the yen's week-long slump of more than 6 percent, encouraging currency traders to continue selling the yen against the dollar.

Germany reported economic growth contracted 0.4 percent in the fourth quarter of 1998 and the Ifo institute said its West German business climate index fell in January. Meanwhile, France reported its industrial output fell in December.

Stagnation in Europe has prompted growing calls from European politicians to lower official interest rates, which could hurt the euro by reducing returns on investments priced in euros.

By contrast, economists Friday were raising their estimates for U.S. growth in the fourth quarter after the Commerce Department reported the December trade deficit was far smaller than expected and the Labor Department said consumer inflation remained well under control in January.

"The economists have been predicting divergences in growth and we are seeing it. The euro slide is continuing slowly and steadily," said Seth Garrett, head of global spot trading at Credit Suisse First Boston.

Overnight in Tokyo, the head of Japan's Economic Planning Agency, Taichi Sakaiya, said a dollar/yen rate of about 120 was appropriate. That comment was the latest of several this week that effectively endorsed the yen's sharp recent slide.

"It was a very aggressive day for the dollar. The question is where do we go from here? The Japanese have said 120 is okay. Does that mean 125 is okay?" said Hillel Waxman, chief currency dealer at Bank Leumi Trust Co. of New York.

Central bankers and finance officials from the United States and Japan will join their counterparts from Britain, Canada, France, Germany and Italy for a summit in Bonn this weekend.

Many currency market pros expect the group — known collectively as the Group of Seven — will issue a joint policy statement on dollar/yen rates, perhaps sanctioning further yen weakness.

"The dollar is pushing up on the perception that Japan's economy is still sick. The focus is on the economic weakness in Europe and Japan," Waxman said.

The dollar late Friday had risen to 121.12 yen, its highest level since December 2, 1998, versus 119.77 yen late Thursday. The euro got as low as $1.1056 before finishing at $1.1067, down from $1.1192 late Thursday.

The greenback rose to 1.4450 Swiss francs from 1.4293 Swiss francs and rose to Canadian $1.4865 from C$1.4860. The British pound fell to $1.6230 from $1.6350.

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