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Euro Leaps to One-Month Highs
By Shinichi Kishima Nov 3 7:42am ET
LONDON (Reuters) - The euro leapt to one-month highs against the dollar on Friday after the European Central Bank intervened in its support for the second time in less than two months.
The euro rose more than 1.5 cents to peaks near $0.88 in the wake of the intervention, although it fell some way short of the heights above $0.90 set after a concerted euro-buying by Group of Seven industrial powers on September 22.
The ECB was not joined by other G7 members on this occasion but it said it had informed them of its plans before it acted. Concern about the global impact of the weakness of the euro was cited by the ECB as the reason for its repeat intervention, the same reason that was given by the G7 in September.
The single currency had lost as much as 30 percent of its value against the dollar since its launch though it has recently begun to pull away from record lows around $0.8225 amid signs of U.S. economic slowdown.
``It is unilateral intervention so it is not going to send the euro to the skies but it is actually a good move -- it shows they care and that they can take the market by surprise,'' said Claudio Piron, treasury economist at Standard Chartered in London.
The timing of the action -- just before the closely watched U.S. employment report due for release at 1330 GMT and Tuesday's U.S. presidential election -- took the market by surprise.
But traders said it was all the more effective for coming as the euro was already steadily recovering from last week's record lows.
``This intervention is well timed. It happens when there is already a slight change in sentiment toward they euro,'' said Steven Saywell, currency analyst at Fuji Bank in London.
SOME ANALYSTS QUESTION UNILATERAL ACTION
Some analysts questioned the wisdom of stepping into the market without the help of U.S., Japanese and British monetary authorities.
``That fact that they said they didn't ask for intervention help leaves us to speculate that they didn't ask because they thought they wouldn't get it, at least from the U.S. so close to the election,'' said Adrian Schmidt, economist at Chase Manhattan in London.
Yet he said the specter of further rounds of unilateral ECB intervention would keep traders on their toes for a while.
``They would know that there is intervention risk regardless of the U.S. intervention,'' Schmidt said.
The market now awaited U.S. October jobs data.
``The market has been focused on U.S. economic figures lately, on evidence of a slowdown there. If we get weak payroll figures, that would add more support to the euro,'' said Matthew Clements, economist at Prebon Marshall Yamane in London. |
