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. Last Updated: 07/27/2016

Euro Takes Breather After Record Fall




LONDON -- The euro held above its record low Monday, buoyed by concern the European Central Bank might intervene, while a report that Yugoslavia had accepted peace principles on Kosovo boosted stock markets robbed of early direction by holidays in the Britain and United States.


Remarks by Bundesbank chief-to-be Ernst Welteke, who told a German Sunday paper that euro weakness needed "close monitoring," put traders in continental Europe on alert for intervention by the European Central Bank.


But there was no evidence of any ECB action and many analysts said they felt the central bank would only step in if the euro threatened to fall to parity with the dollar.


"If we fall to one-to-one with the dollar, then intervention becomes a possibility as European central bankers have recently mentioned they do notwant to neglect the euro," said Lucas Krattiger, head of forex trading at Citiba nk in Zurich.


The euro's fall to a lifetime low at $1.0390 on Friday prompted ECB officials to voice concern about market trends for the first time since the unit's launch in January.


High-profile but unsourced reports in weekend UK newspapers speculated the ECB may take advantage of market holidays in London and New York to buy euros. But dealers said the reports had no evidence of any insight into ECB thinking.


By late afternoon in Europe the euro was quoted around $1.044 against $1.0415 late in Europe on Friday. The dollar was stronger at 121.70 yen from 120.97.


Most European stock markets rose in thin trading, boosted by a report from Yugoslavia's state news agency that the country had accepted principles laid down by the Group of Eight for an end to the fighting in Kosovo.


The report helped Frankfurt's Xetra DAX index claw back most of its early losses to close 0.05 percent lower. Other markets were also boosted, with France closing 0.8 percent higher, Italy 0.6 percent, Switzerland 1.8 percent, Spain 0.4 percent and Amsterdam 0.3 percent up.


Germany's Deutsche Telekom grabbed the spotlight for a second consecutive session, ending 6.1 percent higher after a 9 percent leap on Friday.


The group said Friday the share's weighting in the DAX index is due to more than double, a move which would require funds that try to track the index to buy more of the stock. There was also news on Saturday that the company was holding open the possibility of floating its T-Online Internet division.


Asia trading saw Tokyo's Nikkei 225 stock index rise 0.9 percent and Hong Kong's Hang Seng 0.7 percent.


In Paris, Pernod rose 4.2 percent on newspaper speculation that it was planning a bid for Britain's Allied Domecq spirits business. The company declined comment.


A higher close on Wall Street on Friday offered European shares some encouragement, but with the U.S. market shut investors were wary of taking positions, dealers said.


"The underlying tone is more upbeat but dealers are preferring to remain on the sidelines today with the U.S. and UK markets closed," said one Italian dealer.


European government bonds traded little changed because of the holidays.