Euro Continues to Slide

After a significant pull-back yesterday, the euro continued to lose ground across the board in overseas trading this morning. Compared to last night's New York close of $0.9460, the euro opened today at $0.9405, a further loss of half a cent.

This reassessment of the currency is the market's conviction that euro zone interest rates are on hold for the immediate future. Yesterday, the European Central Bank left zone interest rates unchanged.

As anticipated, the OPEC decision to raise output less than many believed was needed has been ignored by the forex market.

The euro/yen cross rate, which reflects the value of the euro in yen terms, is now well below parity at 99.10, about 1% weaker overnight. "The big focus is on euro/yen," said Margaret Kudarauskas of Currency Network in Boston. "The brunt of the selling pressure is on euro/yen," she said.

Dollar/yen is opening slightly lower at 105.40, with traders wary of trying to push down through 105 for fear of attracting aggressive Bank of Japan buying. The Bank of Japan doesn't like the yen to be stronger. "The market is making a big deal of the (possible) up move in Japanese interest rates, but does not have the stomach to challenge the 105 level," Kudarauskas said.

Further indication of the likely end to Japan's zero-interest-rate policy came in a statement from Bank of Japan Deputy Governor, Sakayu Fujiwara. "We think the Japanese economy is at a stage where the prospect for an end to deflation concerns is approaching," he said.

The pound has continued to look soft, but recovered from earlier lows of around $1.4970 to open at $1.5060. Given the further sell-off in the euro, the euro/sterling cross is lower at 62.40 pence.

The pound was not helped by a statement from the Confederation of British Industry that U.K. export orders fell in June and are now at their lowest level for a year.

Dollar/Swiss franc has benefited from the dollar's strength versus Europe, to open higher at 1.6430. The euro/Swiss franc cross has given also given some ground and stands at 1.5455.

U.S. dollar/Canada has edged marginally higher to C$1.4755.

The Australian dollar is weaker at $0.5990, but this is seen largely as a reaction to a weaker euro and may not be indicative of longer term selling pressure.

The New Zealand dollar is also down a little at $0.4735.

The South African rand again lost ground to 6.94.

The Mexican peso is little changed at 9.86 per dollar, with election concerns still dominating trading.

The Polish zloty is steady at 4.40 per dollar.