Intervention fears as euro dips

The euro is hovering close to the sort of lows that economists have warned could prompt further intervention by the world's banks.

As the week drew to a close, the euro was trading between 86.76 and 86.83 cents against the US currency.

Earlier in the day it had been trading marginally above 87 cents, having fallen overnight to 86.75 cents.

Economists have warned a fall below 87 cents could be the trigger for further intervention by the G7 group of leading industrialised nations.

The European Central Bank - supported by the Bank of England, the Bank of Japan and the US Federal Reserve - intervened last month to prop up the ailing euro, which had fallen as low as 84.4 cents against the US currency.

But the pressure on the euro is thought to be the result of jitters over the wider European economic picture - particularly Thursday's interest rate rise by the ECB - rather than any concerted attack on the European single currency.

On Thursday the ECB raised its key interest rate from 4.5% to 4.75% in 11 euro-zone nations to curb inflationary pressures on the Continent.

Jeremy Hawkins, senior economist at the Bank of America, said a large part of the 2.3% inflation rate across euro-land was the result of higher fuel prices.

Without that, inflation was no more than 1.5% and if oil prices fell the ECB could find it had been too hasty in raising rates, he said.

Last updated: 19:31 Friday 6th October 2000.

http://www.ananova.com/news/story/sm_78126.html?nav_src=newsIndexHeadline

-- Martin Thompson (mthom1927@aol.com), October 07, 2000

Answers

Do you remember what happened in October, 1987? Interest rates were bumped to the breaking point just before that infamous one-day stock market collapse of 22% on the Dow.

Is history about to repeat?

-- Wellesley (wellesley@freeport.net), October 07, 2000.

Startling thing to me was that the Thursday bump in rates did little good. The very next day the euro started down again.

-- Uncle Fred (dogboy45@bigfoot.com), October 07, 2000.