ECB intervention pushes euro above $0.87, but rally falters
The euro moved higher Friday after the European Central Bank intervened on its own to bolster the currency, but failed to sustain the rally.
The single European currency approached $0.88 in London trading but at the end of New York trading fetched $0.8664, compared with $0.8584 a day earlier.
The euro climbed to an intraday high of $0.8789 after the morning intervention from the ECB, its first without outside help from banks such as the US Federal Reserve.
But by mid-afternoon, the single currency had lost all of its earlier gains, tumbling below $0.86 before rallying on fresh intervention rumors.
As speculation turned into confirmation that the ECB had launched a second offensive, the euro advanced again, but this time the gains were less spectacular.
The ECB said it had intervened because it was concerned about "the global and domestic repercussions of the exchange rate of the euro, including its impact on price stability."
The participation of other central banks in the Group of Seven (G7) countries had not been requested, although they had been informed, a spokesman for the bank said.
Analysts said the initial move had been a reasonable success given the absence of the US Federal Reserve and the other G7 central banks that had joined the last intervention on September 22.
"Not bad for one central bank," said Standard Chartered Treasury economist Mike Moran following the first round o intervention. The move had left the ECB "a little bit more credible," he said.
Although the intervention had failed to produce a sustained appreciation of the euro, it would continue to keep the market on its toes for further action, economists said.
Market players applauded the timing of the first attack, which came just when the euro was already showing signs of recovering.
"It's clever because sentiment was beginning to swing back in favor of the euro which made the intervention more effective," Canadian Imperial Bank of Commerce economist Audrey Childe-Freeman said.
In late New York trading, the dollar bought 106.93 yen from 108.10, and 1.7558 Swiss francs against 1.7776.
The pound sterling was exchanged for $1.4483 compared with $1.4449 Thursday.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)