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To: MythMan who wrote (31346)	5/5/2000 8:12:00 AM
From: Lucretius	Respond to of 42523

Top Financial News Fri, 05 May 2000, 8:09am EDT Euro Rises on Speculation ECB May Intervene to Prop Up Currency By Tom Kohn London, May 5 (Bloomberg) -- The euro rose against the dollar for the first day in four, and rebounded from its lowest ever against the yen on mounting speculation the European Central Bank will buy euros to support the currency. The single currency also rose against the British pound and the Swiss franc as traders digested a statement by ECB President Wim Duisenberg, saying the bank will ``monitor the euro exchange rate very closely.'' Yesterday, the euro jumped as much as one U.S. cent as traders speculated the bank would buy euros. It pared those gains late in New York. ``The chances of intervention are increasing appreciably as the market gets wind of'' Duisenberg's statement today, said Steve Barrow, a currency strategist at Bear Stearns International. ``When you look at the statement -- bearing in mind it's something the ECB has not done before -- it must raise the market anxiety on intervention.'' He said the ECB could intervene as soon as this afternoon. The euro rose as high as 89.99 U.S. cents from 89.12 yesterday. It was recently at 89.77 cents. Against the yen, it rebounded from a record low of 95.74 yen, to be at 97.13 yen from 96.49 yesterday. ``The reaction (to Duisenberg's comments) was relatively muted. If you compare the price action to yesterday'' on intervention speculation, when the euro spiked up, ``it shows money speaks a hell of a lot more than words,'' said Michael Metcalfe, a currency strategist at NatWest Global Financial Markets. Concern a U.S. jobs report will boost the case for a 50 basis- point interest-rate rise and weigh on U.S. assets also hurt the dollar. Wage Pressures ``The government report could signal a rise in wage pressures,'' said Kirit Shah, chief markets strategist at Sanwa International. ``That could prompt weakness in the currency.'' The U.S. jobs report is expected to show the nation's jobless rate fell to 4.0 percent in April from 4.1 percent in March, and that the U.S. economy added 340,000 jobs, according to a Bloomberg News survey. That's likely to solidify expectations the Federal Reserve will lift its benchmark rate as much as 50 basis points on May 16. The figures are slated for release at 1:30 p.m. London time. ``The picture for euro-yen is still negative,'' said Tony Norfield, global head of foreign exchange research at ABN Amro. ``There's a lot of direct investment money leaving the euro area. The euro will probably start going back down again next week.'' He said the single currency may fall to 85 U.S. cents. The euro has fallen for four of the last five weeks against the Japanese currency. It's fallen 6.7 percent against the yen and 11 percent against the dollar since the start of the year. The strength of the U.S. economy and higher U.S. interest rates relative to Europe have driven the dollar higher against the euro by drawing investors from Europe. A half-point Fed increase, which some investors expect on May 16, would bring the U.S. benchmark overnight rate to 6.5 percent, compared to the ECB's benchmark rate of 3.75 percent. ABN Amro's Norfield said the market is still concerned about intervention ``although there is no basis for that.'' `Undervalued' ``Our view is that the euro's fundamentally quite undervalued'' against the yen and dollar, said Paul Duncombe, head of currency management at State Street Global Advisers, which manages $600 billion. Still, ``everyone's scared to get on the train first.'' Higher interest rates boost the appeal of a nation's currency by lifting yields on bonds and deposits. Expectations of higher U.S. rates helped propel the dollar to a two-month high of 109.61 yen yesterday. The U.S. currency then fell against the yen as Japanese exporters sold dollars, traders said. ``I can't say I'm very pleased with the current exchange rate of the euro,'' said Alain Joly, Chairman of Air Liquide SA, the world's largest industrial gas producer. The yen ended a three-week decline against the dollar as pre- set orders from Japanese exporters to sell the U.S. currency at about 109.50 yen weakened the U.S. dollar, traders said. That also pushed up the yen against the euro as traders often use the dollar as a conduit in buying and selling yen for euros. Dollar's Drop Norfield at ABN Amro said the drop in the euro against the yen was boosted by dollar's drop against the Japanese currency. ``The euro is having a bit of a tough time,'' said Neil Hitchens, who helps oversee $13.7 billion pounds at Global Asset Management. ``There's probably a bit more pain to come.'' Japan's financial markets are shut for the Golden Week holiday, analysts said. Japan reopens on Monday. Some traders say that even if the figures later today point to higher-than-expected U.S. rates, the impact on the dollar will be limited by large dollar-selling interest out of Japan. As Japan recovers from its worst recession in 50 years and its companies trade more goods overseas, the rising volume of dollars needed to be repatriated back in to the yen is seen restricting dollar strength.