Euro Strengthens on Dollar; Gold Climbs

Bullion futures are up $4 at $932.70 an ounce.
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The euro was trading near its all-time high again Tuesday as the European Central Bank continues to show no sign of letting up on its inflation fight.

One euro recently was selling for $1.5810, up from $1.5804 Monday, and it had traded as high as $1.5875 earlier in the session. The common currency reached its best-ever level around $1.591 last Thursday before retreating.

"There is a sharp contrast in official monetary policy between the

Federal Reserve

and the ECB," says David Gilmore, a partner at Foreign Exchange Analytics. "Until that picture changes, it's going to be hard for the dollar to rally against the euro."

The Fed is following a policy of loose monetary policy and low interest rates in its effort to avoid an economic slowdown in the U.S. at the possible cost of higher inflation. Meanwhile, the ECB is keeping the cost of borrowing euros relatively high as it seeks to keep a lid on inflation, at the potential expense of economic growth.

The divergence in policies, and the resulting differential in interest rates, will keep the euro attractive to yield-seeking investors relative to the greenback, many observers believe.

In other currencies, the dollar was selling for 101.34 Japanese yen, up from 100.99 yen a day earlier. The British pound was trading at $1.9642, down from $1.9741 previously.

The

CurrencyShares Euro Trust

(FXE) - Get Report

was losing 0.2%, and the

CurrencyShares Japanese Yen Trust

(FXY) - Get Report

was off 0.6%. The

CurrencyShares British Pound Sterling

(FXB) - Get Report

was lower by 0.6%.

In the metals markets, gold prices were moving higher. Benchmark bullion futures were edging up $4 at $932.70 an ounce in recent action on the Comex division of the New York Mercantile Exchange

The

streetTracks Gold Shares

(GLD) - Get Report

, which holds bars of pure gold, was gaining 0.7%.

In the precious metals patch, shares of

Yamana Gold

(AUY) - Get Report

were up 1.5%, while

Newmont

(NEM) - Get Report

and

Barrick

(ABX)

also rose.