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Euro slips below 1.50 dollars

Latest update : 2008-08-08

For the first time in five months, the euro was trading at under 1.50 dollars, amid fears of a potential European recession. The drop followed official reports of an Italian economic contraction in the second quarter.

The euro slipped below 1.50 dollars Friday for the first time in five months on fears of a recession in the single currency area after Italy reported a contraction in the second quarter, dealers said.

The euro was trading at 1.4996 dollars around 1920 GMT in New York.

Around 1930 GMT, the euro edged up to 1.5008 dollars, compared with 1.5321 dollars Thursday around 2100 GMT.

The Italian economy contracted in the second quarter, official data showed Friday, adding to a deepening sense of gloom about the eurozone economy amid a barrage of bad news for the 15-nation bloc.

Italy is the first eurozone country to reveal figures for the second quarter and a 0.3-percent quarter-on-quarter contraction underlines fears that a severe slowdown, even a broad European recession, could be looming.

European Central Bank president Jean-Claude Trichet, announcing unchanged interest rates on Thursday, acknowledged the eurozone economy was showing signs of weakening, in comments that sent the euro into a tailspin.

"These are the first GDP figures to come out and they anticipate a general setback in Europe," said an analyst at French investment bank BNP Paribas, Caroline Newhouse-Cohen, commenting on the Italian figures.

"Even if Italy is suffering from a more unfavorable situation than Germany or France, we have every chance of seeing a contraction of about 0.3 percent or more, in the whole of the eurozone."

She added: "Even the German GDP, expected next week, is likely to show a fall of 0.8 percent."

A recession is defined as two consecutive quarters or more of economic contraction.

The dollar has slumped against the euro and other currencies in the past year amid slowing US economic growth, but it has started to rebound recently amid concerns about eurozone, and particularly German, growth.

Date created : 2008-08-08

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