Euro Hts 3-Week Low Against Dollar October 12, 2000

By MIRANDA LEITSINGER

AP Business Writer

NEW YORK (AP) via NewsEdge Corporation - An attack on a U.S. navy ship in the Arabian Peninsula and a resulting spike in oil prices caused the euro to plunge against most other major currencies and to trade at a three-week low against the dollar.

The euro dropped to 86.13 cents in European trading. In late New York trading, the euro was quoted at 86.22 cents, down from 86.88 cents late Wednesday.

The 86.13 cents figure was the lowest the euro has traded against the dollar since the G7 intervened on Sept. 22 to prop up the embattled currency.

Higher oil prices, continuing troubles in the Mideast and the attack on the destroyer USS Cole, dragged the euro down in all corners. The Swiss franc marked a historic high against the single currency _ 150.29 Swiss francs _ and the British pound sterling also peaked against it, with one euro trading at .5854 British pound sterling _ the lowest since May 9.

Higher oil prices in particular caused a problem for the euro-zone, where the rising cost of fuel sparked protests in countries throughout Europe during the summer.

The euro has steadily fallen in the past year from its high of $1.04 versus the dollar to its all-time low of 84.38 cents last month. In order to help support the euro, the European Central Bank, and its U.S., Japanese, British and Canadian counterparts intervened in the currency market three weeks ago at 87.20 cents.

Currency traders said that the fear of another intervention in the currency market has held the euro over the last week above a key technical level of 86.60 cents, but Thursday's drop below that, they said, has proven that the euro will nonetheless continue its downward spiral.

``We're still destined to make a new low,'' Andrew Chaveriat, a currency analyst at BNP-Paribas, said. ``Currency traders are getting comfortable trading below where the G7 intervened ... the pressure is still on for the euro.''

Some currency traders said that the intervention has yet to happen because the euro's decline has been a steady grind in an orderly market, but others warned that the time for action is near.

``I would not be looking at intervention just yet. But we are certainly at a point where the banks should be starting to talk tough, saying `Look we see what is happening,' '' said Neil Parker, an economist at the Royal Bank of Scotland in London.

``It does not need to go far below where we currently are,'' for intervention to become a possibility, he added.

In late New York trading, the dollar was quoted at 107.51 Japanese yen, down from 107.57.

Currency traders said that having tested the yen at the high 109 level last week, the currency has now settled down to a range where it has been comfortable in the past.

Currency traders said that the yen will hover in the 106.25 to 108.50 range over the next week.

The dollar also was quoted at 1.7426 Swiss francs, up from 1.7416, and 1.5071 Canadian dollars, up from 1.5032. The British pound rose to $1.4704 from $1.4616.

Currencies of the 11 countries participating in the euro are no longer traded separately and are tied to the euro by a fixed rate. Based on Thursday's euro rate, the dollar was worth: 2.2681 German marks, up from 2.2512; 7.6070 French francs, up from 7.5501; and 2,245.47 Italian lire, up from 2,228.67.

http://www.individual.com/story.shtml?story=h1012163.802

-- Martin Thompson (mthom1927@aol.com), October 12, 2000

Answers

The Euro will act directly, inversely, to the price of oil -- the higher oil, the lower the Euro, and vice versa.

-- Biliver (billiver@aol.com), October 12, 2000.