Friday October 6 3:58 PM ET

Euro Slips Lower

By Maggie Lake

NEW YORK (Reuters) - The euro drifted lower on Friday, but the damage was limited as dealers, wary that Europe's central bank may again try to prop up Europe's single currency, struck a cautious tone ahead of a long U.S. holiday weekend.

The latest euro erosion came just a day after the European Central Bank surprised markets with an interest rate hike which dovetailed with last month's unexpected central bank intervention aimed at stabilizing the fast-falling currency.

``This market is going to continue to challenge central banks to put up or shut up,'' said Ben Strauss, currency trader at Bank Julius Baer. ``We are back to the same game that was played prior to the original intervention -- only now the market is more cautious because it knows that intervention really is a tool.''

Even Friday's U.S. jobs data, which caused U.S. stock markets to slump, failed to energize the euro.

America's unemployment rate dipped to 3.9 percent in September from 4.1 percent in August, matching its lowest level in 30 years. Stock investors, fearing the Federal Reserve may need to fight inflationary pressures with more interest rate hikes, embarked on a selling spree that drove the Nasdaq down nearly 4 percent.

But the euro (EUR-) nonetheless dipped to 86.62 cents, its lowest level since European, American and Japanese central banks joined forces in a rare rescue operation designed to prevent the weak euro from jeopardizing global growth.

Light buying by traders squaring up for the three-day Columbus Day holiday weekend helped drag the euro off its lows.

The single currency closed New York at 86.80, down only marginally from Thursday's close.

Against the yen, the euro (EURJPY-) dipped to 94.34 before edging back to close at 94.40, down almost half a percent.

Chipping Away At Intervention Armor

Even manufacturing orders in Germany -- the euro zone's biggest economy -- which rose 1.7 percent on a seasonally adjusted basis in August from July, well above the expected 0.6 percent increase -- failed to give the euro much lift Friday.

Looking ahead, dealers said they expect the single currency to remain under pressure as the market tries to find the pain threshold for central banks.

``We see the 85 (cents) level as a trigger, at which it's likely we'll see intervention again,'' said Eric Nickerson, chief currency strategist at Bank of America in New York.

More generally, analysts remained convinced that the United States was still the most attractive place to park their money.

``The (jobs) number is generally dollar supportive ... The U.S. remains the more attractive place to invest, ensuring that the dollar will continue to perform stronger against the euro,'' said Kevin Logan, chief economist at Dresdner Kleinwort Benson, in New York.

In other trading, the dollar fell over a quarter of a percent against the yen (JPY-) to trade near 108.75, well below Thursday's seven-week highs of around 109.60 yen. Traders say a failure to break above tough resistance near 109.80-110 prompted pre-weekend profit-taking .

Elsewhere, the Australian dollar (AUD-) stabilized at US$0.5332 after falling to record troughs overnight. The New Zealand dollar (NZD-) also stayed above historic lows set earlier this week below US$0.40.

http://dailynews.yahoo.com/h/nm/20001006/bs/markets_forex_dc_132.html

-- Carl Jenkins (Somewherepress@aol.com), October 06, 2000

Answers

Propping up the euro with raised interest rates is a fool's undertaking. Ain't gonna work, for more than a few weeks, then the downward slide will resume.

-- Wayward (wayward@webtv.net), October 06, 2000.