WEDNESDAY OCTOBER 25 2000 Euro falls to new record low The euro fell to a new all-time low against the dollar this morning as hopes faded that the Group of 20 meeting in Montreal would yield any positive news for the single currency.

Traders said a Dutch bank had made a substantial euro/dollar transaction, which had forced the value of the euro lower.

"There has been a large sell order by a European bank all morning. Intervention is always a threat, but at the end of the day, if a bank has a large order, it means people are not that worried," said a trader from a European bank in London.

Rumours in the market place had it that the identity of the bank was Dutch financial group ING Barings, which had sold 1 billion euros for dollars, in preparation for a takeover bid for a US rival.

In London the euro fell to as low as $0.8288 before making a slight recovery. The fall has taken the euro to over one cent below the level at which the worldBs central banks intervened to prop up the currency last month.

It is also nearly 30 per cent below its value against the dollar when it was launched in January 1999.

Losses in the euro against the dollar were driven by losses in the euro/yen exchange rate, dealers said, amid talk Japanese firms were selling loss-making euro positions.

The euro's fall also dragged down the Swiss Franc, which reached a 14-year low against the dollar

http://www.thetimes.co.uk/article/0,,24987,00.html

-- Martin Thompson (mthom1927@aol.com), October 25, 2000

Answers

Tight-lipped G20 ministers shy away from euro comment October 25, 2000

By Svea Herbst-Bayliss

MONTREAL, (Reuters) - Volatile stock markets and new lows for Europe's single currency provided a gloomy backdrop for a meeting of tight-lipped finance ministers and central bank chiefs in Montreal on Wednesday.

But ministers heading for the closed-door meeting of the Group of 20 industrialized and emerging market economies turned down requests for comments on the faltering euro.

German Finance Minister Hans Eichel declined even to answer a question. ``We are not saying anything about the euro,'' a member of his delegation said as Eichel stalked away.

Italy's finance minister and central bank governor also declined to say anything about the currency, which traded at record lows just below 83 U.S. cents on Wednesday.

European sources said the ministers and central bankers had drafted a seven-page communique for release at the end of the gathering, which is being chaired by Canadian Finance Minister Paul Martin.

They said the draft made reference to the economic risks from costly oil, but referred to exchange rates only in the broadest of terms. The final statement is likely to be released at around 5 p.m. (2100 GMT).

A tangential reference to currency rates without specific mention of the euro would be different from a statement released by the Group of Seven industrialized countries after a meeting in Prague last month.

Delegates said the G20, which includes emerging markets, had little reason to comment on the euro.

Ministers and central bankers from Britain, Canada, France, Germany, Italy, Japan and the United States said last month they were concerned about ``the potential implications of recent movements in the euro for the world economy.''

At that stage the ever-weakening currency was trading at around 86 cents, despite a temporary blip up to 90 cents after central banks in G7 countries intervened to defend the currency. Fading market expectations that central banks will intervene again has helped drive the euro to new lows.

DEAF EARS ON EURO

Wednesday's slide to record lows around 82.90 cents means the euro has fallen almost 30 percent against the U.S. dollar since it was launched in January 1999. European officials have repeatedly said that the currency is undervalued and the European economies are strong. But markets are just not listening.

Other currencies also came under pressure Wednesday against the strong U.S. dollar. The Canadian and Australian dollars, the yen and the British pound all showed weakness against the U.S. unit.

The G20 was set up last year to give emerging markets a louder voice in international affairs of state and delegates said its formal agenda would stress what needed to be done to strengthen the world financial system and work out how the private sector should be involved in rescue deals.

That is a contentious issue. Many Europeans are seeking a rule-based approach and Canada's Martin says there are times when a debt standstill might be appropriate. The United States wants to deal with each country on its merits.

But delegates said they would also discuss the latest run-up in the price of oil and what can be done to bring prices down again. The G20 comprises major oil producers Saudi Arabia, Mexico and Russia and sources said Britain's finance minister Gordon Brown was encouraging Saudi Arabia to maintain its commitment to raise oil production in order to lower prices.

The G7 statement last month also fretted about the cost of oil. ``We are concerned about the adverse effects on the world economy of the recent sharp increase in the world oil price,'' the G7 said at that time.

Oil is trading well below last month's 10-year high, but still above levels the U.S. administration would like to see.

Delegates said a broad briefing on the state of the world economy was the first item on the agenda. An official from the International Monetary Fund said there had been no revision yet to the economic forecasts released last month but IMF experts were ``going through it now.''

^ REUTERS@

http://www.individual.com/story.shtml?story=d1025111.500

-- Martin Thompson (mthom1927@aol.com), October 25, 2000.