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The euro showed some signs of life this morning, rising against the dollar after falling to a 16-month low Wednesday. Analysts say any euro gains are limited and more likely a correction from the massive selling over the past few weeks.
Today's decision by the European Central Bank to leave short-term interest rates unchanged at 1 percent had little effect on the euro. The currency's slide on Wednesday was attributed to warnings by the ratings agency Fitch, which said the euro could collapse without additional support from the ECB.
The greenback strengthened against a basket of currencies Wednesday and the Japanese yen and British pound fell to new lows versus the dollar.
Jeff Knight of Putnam Investments says the dollar will continue to outperform other currency markets this year. A stronger dollar will not only bring foreign capital into U.S. markets (which would further support the dollar), but U.S. multinationals could also see a boost in profits.
U.S. multinationals have reported record earnings quarters in the past year because of increased export demand from a weak dollar. Knight does not expect revenues to take a hit from the dollar's surge.
He favors the dollar over the euro and British pound, citing the continuing sovereign debt crisis as the reason for the weakness in these currencies.
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