Euro struggles despite intervention

Published November 7th, 2000 - 02:00 GMT

The euro struggled against the dollar in Asia Tuesday as investors reacted with scorn to the European Central Bank's latest solo attempt to lift the currency through intervention. 

 

But trade was quiet as the market awaited the US presidential election, dealers said.  

The European single currency traded at $0.8636 around 5:40 pm (0840 GMT) in Tokyo, up from $0.8614 in New York but well down from $0.8690 in Tokyo late Monday. 

 

"The impact of the intervention is fading out quickly," said Fuji Bank dealer Hideyuki Tsukamoto. 

"No matter how hard the ECB tries to show its support for the euro, investors see it as a great opportunity to sell the unit," he said. 

 

"It illustrates how many people want to dump the currency." 

The euro rose to a high of $0.8732 immediately after the ECB stepped into the market around 5:00 pm Tokyo time Monday, going up sharply from $0.8660 immediately before. 

The ECB also intervened on its own twice on Friday to support the ailing euro, lifting the currency up close to $0.88.  

 

Friday's initial move was only the second ECB intervention since the euro's January 1999 launch, following concerted action taken with the United States and Japan on September 22. 

 

Traders said the unilateral nature of the ECB's new interventions had dented their impact, but Japan's Finance Minister Kiichi Miyazawa expressed support for the ECB's actions. 

 

"We are watching them with shared feeling and understanding," the minister told a regular press conference. 

But Tsukamoto noted: "The market now sees the series of ECB actions as wasteful attempts. Interventions won't work any more in pushing up the euro."  

 

In Singapore, research house IDEAglobal.com said: "ECB's follow-up intervention is already yielding diminishing returns as yesterday's operation was unable to push the euro above the highs seen last Friday." 

 

The risk is that "intervention is merely providing good levels for selling," it said in a report.  

The euro also traded at 92.55 yen, up from 92.48 in New York but well down on 93.19 in Tokyo Monday afternoon. 

 

The dollar meanwhile bought 107.17 yen, compared with 107.43 yen late in New York and 107.13 yen in Tokyo late Monday.  

 

"It is still too hard to make any forecast (on the US vote) and investors are rather focused on moves by the equity and bond markets to give a lead to their currency trading," said Bank of Tokyo-Mitsubishi dealer Kiyoshi Kuzuhara. 

 

"But it is unlikely that the outcome will lead immediately to either buying or selling of the dollar," he added.  

 

In late Singapore trade, the US dollar rose to 49.28 Philippine pesos from 48.375, after Philippine President Joseph Estrada rejected calls for him to step down.  

 

Manila markets had soared on Monday on investors' hopes that Estrada would be removed from office over a corruption scandal.  

 

The greenback also climbed to 43.585 Thai baht from 43.335, 9,255.00 Indonesian rupiah from 9,127.00, 1,136.00 South Korean won from 1,132.55, and 1.7367 Singapore dollars from 1.7316. 

 

It fell to 32.1525 Taiwan dollars from 32.154.―(AFP)  

 

© Agence France Presse 2000  

 

© 2000 Mena Report (www.menareport.com)

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