the euro collapse:
news.bbc.co.uk
Euro plunges yet again
Europe's single currency, the euro, has tumbled to new record lows against both the US dollar and the Japanese yen.
In trading in London, the world's largest foreign exchange market, one euro bought just $0.8232 or 88.93 yen.
Sterling followed in the euro's wake. In the morning one pound bought as little as $1.4237, and traders predicted it could fall well below $1.42.
However, both the euro and sterling then recovered amid rumours that an intervention by the European Central Bank and the Bank of Japan was imminent. In late afternoon trading, one euro bought $0.8274 and one pound was worth $1.4329.
Reports that Iraq would soon start to price its oil exports in euro also helped the single currency.
The President of the European Central Bank, Wim Duisenberg, meanwhile insisted that the eurozone economies were on track.
"The conditions, as I see them, for business in the euro area are favourable as the structural environment improves clearly and the economic environment is positive," he said.
He refused to comment on the single currency's current weakness, only to say that these "very, very, short term factors" would prove to be "very temporary".
Intervention doubts
On Wednesday, the euro had dropped below $0.83 for the first time, but had stabilised in late trading and held steady on Asian markets on Thursday morning.
The most recent plunge had begun after a majority of currency traders appeared to have convinced themselves that enthusiasm among the world's central bankers for intervention to support the euro had been fading.
Since its launch in January 1999, the euro has now declined nearly 30% against the dollar.
Finance chiefs and central bankers gathered in Montreal for a summit of the world's 20 leading nations have yet to give a clear warning of further intervention to prop up the currency.
US Treasury Secretary Larry Summers said "there was no focused discussion" on the euro or other currencies at the summit.
Traders and speculators also doubt whether the US government would authorise any intervention with just 12 days to go to the presidential elections.
Below intervention point
The euro is now worth a cent less than its was when leading central banks in September sold foreign exchange reserves to support the currency.
Currency traders predict the euro could slump as low as $0.75
Dealers have warned that the euro may fall further, with some traders predicting it could reach $0.75.
Jane Foley, currency analyst at Barclays Capital, said it was hard to predict how low the euro might go "because it's come down so fast.
"But the downward trend is still there," she said.
Swiss franc hit
The euro's fall on Wednesday also dragged down the Swiss Franc, which slipped to a 14-year low against the dollar.
Ben Strauss, a currency trader at Bank Julius Baer in New York, said sentiment towards the euro was "totally negative", adding that nobody wanted to hold any European currencies now. |
