Euro strengthens further as ECB keeps rates steady


  • Business
  • Saturday, 10 May 2003

BY KATHY FONG

THE euro strengthened further against other major currencies yesterday as investment money poured into euro deposits following the European Central Bank's (ECB) decision to leave interest rates unchanged at 2.5%. 

The euro touched an historical high of 135.26 against the Japanese yen in Asian trade yesterday but eased back to 134.93 yen in early London trade. 

Against the US dollar, the euro also surged to a fresh four-year high above the US$1.15 level in Asian trade, and was quoted at US$1.1477 in early London trade compared with US$1.1451 in New York the prior day. 

Forex dealers said the euro also benefited from concerns that Japanese officials might intervene in the market to cap the yen's sharp gains against the US dollar. 

They said there were also rumours the Japanese authorities had started open market operations to weaken the yen. 

Japan's Finance Minister Masajuro Shiokawa said yesterday that the yen had strengthened “too much'' but declined to comment on whether the government had intervened in the currency market to stem the rise. 

Thanks to the euro's rise against the yen, the US dollar regained some lost ground against the Japanese currency, rising to 117.30/35 yen in early London trade, well above the overnight 10-month low of 116 yen in New York. 

Investment fund managers who had put their money into euro deposits were also encouraged by comments from ECB governor Wim Duisenberg that the euro's uptrend was not excessive or alarming. 

“Now that the Fed (the US Federal Reserve) is on an easing bias and the ECB has kept its rates steady, I think the market is expecting a further widening of the yield gap between the dollar and the euro,” J.P. Morgan Chase global markets officer Junya Tanase was quoted by Reuters as saying. 

A firm euro might result in overseas trips being more affordable for Europeans in the coming summer holidays but might, on the other hand, cause a drop in tourist arrivals to Europe. 

A soft US dollar would make it more expensive for Americans to travel abroad.  

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