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First Posted: 3/7/2014 (AP) The euro on Friday struck its highest level against the dollar for nearly two and a half years in the wake of the European Central Bank's decision not to cut interest rates further.
Up 0.3 percent at $1.3917, the currency for the 18-country eurozone hit its highest rate since it touched $1.4170 in October 2011.
The advance comes in the wake of Thursday's decision by the ECB to not cut interest rates following a run of relatively upbeat economic data across the eurozone.
For weeks, many traders had been predicting that the ECB would cut its key interest rate from the already record low of 0.25 percent to boost the muted economic recovery and to prevent a debilitating bout of falling prices.
However, after a run of solid economic indicators and unexpectedly strong 0.3 percent growth in the final quarter of 2013, the ECB opted against further easing measures.
"As a result the market judged that the prospects of further ECB monetary stimulus this cycle had diminished," said Jane Foley, senior currency strategist at Rabobank international.
Europe's single currency has been steadily rising from around $1.18 since the summer of 2012, when ECB President Mario Draghi said he would do "whatever it takes" to save the euro.
With fewer traders thinking a breakup of the currency union was possible, the euro strengthened even though the eurozone's economy lagged that of the United States.
Some analysts think that an appreciating euro may eventually push the ECB to ease monetary policy. A stronger euro can weigh on inflation, which the ECB is trying to bring back up toward its goal of 2 percent. It is currently at just 0.8 percent.
A rising currency can also make exports more expensive and therefore less competitive on international markets. That could hurt economic activity and keep unemployment high.
"A spike above the $1.40 level may well force the ECB to act," said Derek Halpenny, an analyst at Bank of Tokyo-Mitsubishi UFJ.
<a title="Associated Press" href="http://www.ap.org" class="url org fn">Associated Press</a>

Euro hits highest level against dollar since 2011