Currency markets have remained fairly quiet overnight, with the key relationships continuing to reflect the market's preference for dollars. The established pattern of a weakening euro with only modest covering rallies looks like it will be in place again today.
In overseas trading, the single currency dipped to a new record low of $0.8480 before edging back to open in New York at $0.8540. The euro has now notched an astonishing seven new record lows in the past 10 days.
"There is a little change of tone," said a forex trader in London. " There is a lot more talk of intervention," he added.
The next big hope for the euro is this weekend, when
ministers meet in Prague. Currency intervention is expected to be a major topic of discussion. One major problem will be that the U.S. is unlikely to be willing to join any intervention strategy, which would severely diminish such a move's effectiveness in the eyes of the forex community.
Also, next week's referendum in Denmark over whether to join the euro zone looks like a negative for the single currency. The "no" camp is currently leading, according to opinion polls released yesterday.
"We're not really in the right situation for more authoritative intervention," commented Derek Halpenny of the
Bank of Tokyo Mitsubishi.
Tomorrow's report from the
research institute in Germany may also significantly impact the euro's near-term fortunes, particularly if it suggests that business confidence is not as strong as expected.
Traders continue to focus on the ongoing capital flows, which favor the U.S. over all other investment areas. Much of the reason for this trend is evident in growth numbers published today by the
International Monetary Fund
. The IMF indicated that the U.S. economy is expanding at a 5.2% rate this year, while the euro zone is recording only 3.5% growth.
Dollar/yen was opening firmer at 106.90. The euro/yen relationship is a slightly more favorable to the euro at 91.25.
Sterling is holding just above a 14-year low against the dollar at $1.4035, and it's steady against the euro. Economic growth in the U.K. expanded at a rate of 3.1% in the second quarter.
"I suspect that we should stay above $1.40," the forex trader said. "Key will be the
Monetary Policy Committee
Those minutes are scrutinized each month to assess the committee's bias toward raising or lowering the
Bank of England's
The dollar/Swiss franc was drifting without direction and opened at 1.7780, fractionally below last night's close. The euro was weaker vs. the Swiss franc at 1.5180.
The Canadian dollar was steady at C$1.4860. Traders are unwilling to buy the Canadian currency in any sustained amount in the absence of any signs that Canada could overtake the economic performance of the U.S.
The Australian dollar still can't get far away from its record lows vs. the dollar. The Aussie was opening barely changed at $0.5425. Its New Zealand counterpart was close to all-time lows at $0.4130.
The South African rand touched a record low of 7.29/dollar yesterday and is only a touch above that level at 7.28 today. Inflation in South Africa rose slightly less than expected, at 6.8% year-on-year.
After several days of losing ground, the Indonesian rupiah has made modest gains on the back of higher oil prices and was trading around 8,625.
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