Euro sees biggest rise in two
months after EU ministers meeting
The euro had its biggest advance against the dollar in
two months in New York this week after European finance ministers ended
a meeting with "no view" on how to stem gains in the currency,
with the currency gaining another one per cent against the dollar yesterday.
Irish Finance Minister Charlie McCreevy, who chaired the meeting late
Monday, stopped short of calling for action from the European Central
Bank. The ministers said they wanted to "particularly stress stability"
in exchange rates after the euro last week rose to a record USD1.2899
"Ministers effectively gave the green light for the euro to climb
steadily, not rapidly, back to USD1.30," said Steve Pearson, chief
currency analyst in London at HBOS Treasury Services Plc.
Against the dollar, the euro surged to USD1.2505 at 9:03 a.m. in New
York from USD1.2349 late yesterday, according to EBS prices. Versus
the yen, the euro strengthened to 134.38 yen from 132.45, the biggest
increase since September, after the Bank of Japan unexpectedly added
cash to the economy. The yen traded at 107.55 per dollar from 107.25.
The BOJ decision, predicted by just one of 15 economists polled by Bloomberg
News, may be an effort to help slow the yens gain against the
dollar and the euro in the past year and protect exports, said Hans
Guenter Redeker, head of currency strategy at BNP Paribas SA in London.
This weeks surge in the euro came as European officials including
ECB President Jean-Claude Trichet last week expressed concern about
"brutal swings" in the exchange rate after the euro rose more
than a fifth in a year. French Finance Minister Francis Mer told reporters
today his main worry is "volatility" in the currency. "We
want to have a stable rate," he said.
"Rhetoric can only last so long without policy backing it,"
said Lee Ferridge, head of currency strategy at Rabobank Groep NV, the
third-largest Dutch bank.
The euro rose even as German investor confidence fell in January for
the first time in three months. Germanys recovery from recession
in the third quarter may be damped as the euros 17 percent appreciation
against the dollar in the past year crimps earnings of exporters including
Volkswagen AG. Germany accounts for almost a third of the euro economy,
which also recovered in the third quarter.
Irish Finance Minister McCreevy said "there was no view" on
how the EU might stabilise currency markets after the dozen euro- region
ministers called for "stable" exchange rates in a joint statement
with the ECB.