Euro Inches Back Up After Dipping Below $1
- By Lisa Jucca
- Dec. 04 1999 00:00
LONDON -- The embattled euro regained a toehold above lifetime lows it fell to against the dollar Friday, inching away from the crucial one-to-one level it breached a day earlier.
But analysts said the euro was still at risk of dropping back through parity against the dollar and predicted this level to be breached again soon.
Bearish traders may try to push the euro down again any time since remarks made by European Central Bank president Wim Duisemberg presentd in the Wall Street Journal on Friday suggested the bank was not concerned about its slide through $1.
Duisenberg told the U.S. paper that the break was only of psychological significance. He added that the ECB would never act with Japan alone to weaken the yen and that he did not foresee coordinated intervention between the Bank of Japan, the ECB and the Federal Reserve for the time being.
"The euro is still vulnerable to further losses, particularly as the latest comments by Duisenberg seem to suggest the ECB is not keen to intervene at the moment," said Patrick O'Sullivan, economist at AIB Group Treasury in Dublin.
"The key today would be U.S. payrolls. If they come in below expectations this could underpin the U.S. stock market, support the dollar, and we could see euro/dollar falling back through parity."
The euro is currently hovering around $1.0030 after falling to an all-time low around $0.9990 in Asia.
According to a consensus of economists, non-farm payrolls are expected to have risen 226,000 in November after a 310,000 gain in October.
ECB council member Klaus Liebscher said Friday that the euro weakness was exacerbated bu the thin year-end volumes.
Analysts said Duisenberg's comments Thursday that the German government's intervention to rescue construction company Philipp Holzmann AG did not help Europe's image were also undermining confidence in the euro.
"Chancellor [Gerhard] Schr?der's intervention [to rescue Holzmann] has not helped, but he is not responsible," said David Bloom, currency analyst at HSBC Markets.
However, looking ahead to the new year, analysts said the economic backdrop in Europe would support an appreciation of the single currency into the new year.
"December is a somewhat critical month for the euro," said Michael Rottmann, currency strategist at HypoVereinsbank in Munich. "We will probably see some window-dressing toward the end of the month as no one will want to go into the new year with too much euro exposure given its underperformance so far this year."
He said there was a chance of improving sentiment toward the euro in January given the improved economic background.
Meanwhile the yen traded in a narrow range against the dollar.
"The resistance level is stuck at around 102.80, but the downside has gradually inched up. From around 101.50, it came up to 102.00 and today the support has been above 102 yen," said a city bank dealer in Tokyo.
One factor helping maintain dollar/yen's strength Friday was the expectation that Japan's third-quarter gross domestic product figures could be weaker than previously thought.
Economic Planning Agency chief Taichi Sakaiya said earlier in the day that Japan may post an economic contraction for the July-September quarter in the data due out on Monday.
"If the GDP is slightly below zero, dollar/yen should stay stable at around current levels, but combined with a somewhat weaker euro/dollar exchange rate we could see a test of the 100 level in euro/yen," HypoVereinsbank's Rottmann said.
The dollar edged lower against the yen in earlier trade after Bank of Japan governor Masaru Hayami told parliament that other nations were not very worried about the yen's appreciation.