Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (244674)	6/9/2003 4:17:31 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 436258

ECB considers halting euro rally (The Times) Monday, June 9, 2003 timesonline.co.ukthe European Central Bank’s governing council is considering intervening in the currency markets to rein in the rapid rise of the euro if the currency climbs to levels above $1.30. The Times has learnt that at least one senior member of the ECB council has canvassed the prospect that the central bank will wade into the markets to restrain the euro if its ascent against a weakening dollar continues. It is understood that the council member, the governor of a leading national central bank, openly discussed the prospect of intervention during recent private meetings. The key ECB official, who plays a leading role in setting the central bank’s strategy, is understood to have strongly implied that it would be keen to halt the euro’s rally if the currency rises to levels between $1.33 and $1.35. Having shot above its January 1999 launch value, the euro hit a record high of $1.1932 on May 27, taking its gains against the dollar this year to more than 13 per cent. The governor noted that after the dollar’s last prolonged slide, in the mid-1990s, $1.33 to $1.35 was around the level at which the rise of the German mark, in euro equivalent terms, had begun to be halted. Economists and strategists said that such a view within the ECB was highly plausible. Nick Parsons, senior currency strategist at Commerzbank, noted that the ECB’s published estimates of the euro’s “fair value” were in a range averaging about $1.10. The ECB had last intervened in 2000 when the euro fell more than 25 US cents below that level, to below $0.85, a key level also mentioned by the ECB official. Mr Parsons argued that it would therefore make sense if intervention were considered following a rise of a similar scale from this average fair value — to around $1.35. “It is not surprising to hear people semi-publicly mulling this over,” he said. However, he argued that intervention would make sense only once the ECB had exhausted most of its interest rate ammunition, with rates below 1 per cent. Last week the ECB cut rates by a half-point to 2 per cent. “Intervention would be a logical policy response once they had exhausted all the other policy options,” Mr Parsons added. The Times has also learnt that a main reservation expressed by the governor over any intervention was whether US support for an operation could be secured. He is understood to have noted that the scale of the US current account deficit could make Washington reluctant to halt a dollar correction that would help to alleviate this problem. While the euro’s sharp appreciation is piling pressure on the embattled eurozone economy’s manufacturing sector, the dollar’s decline is a boon for American industry. John Snow, the US Treasury Secretary, has signalled the Bush Administration’s tacit welcome for a weaker dollar through a series of thinly veiled remarks to the media.