The foreign exchange market is getting its breath back after yesterday's major euro selloff and subsequent partial recovery. This morning, the single currency is opening about 1% above record lows at $0.8730. Today, trading is likely to be muted, but many traders are waiting for the next round of selling to kick in.
took a look at the
euro's woes in a separate story.
"Overall, the market tone is still bearish," said Jeremy Hawkins of
Bank of America.
The market is now focused on today's
meeting of European finance ministers at Versailles. With a collapsing currency, sharply higher oil prices and conflicting political strategies, you can guess there is a full agenda. A statement on euro strategy is expected at the end of the meeting.
The drumbeat of verbal support for the euro notched up today. Particular effort has been made to spin the comments made by German Chancellor Gerhard Schroeder, who said the euro's current level is " not a cause for concern." These views played a major role in creating the atmosphere behind the latest attack on the euro.
Luxembourg's prime minister Jean-Claude Juncker attempted to correct the impression that Schroeder was relaxed about the currency's weakness. "The Chancellor's remark was hopelessly misinterpreted because he did not want to say that the euro/dollar rate suits us where it currently is. He wanted to make clear what all heads of government and finance ministers are saying: a strong currency is appropriate for a strong currency zone," Juncker said in a radio interview.
Hawkins is skeptical any further verbal support for the euro will have much effect. "International investors don't know what's going on any more," he said. They will simply pick up the view that "there are some politicians out there who don't really care."
Oil prices are fast becoming the next problem for the euro zone. France is in the midst of nationwide fuel price protests and there are fears of slowing growth if oil stays around current levels of $35 per barrel.
The yen has backed off from last night's close at 105.00 to open at 105.55.
, in a widely anticipated move, downgraded Japan's sovereign debt rating. The downgrade, which was blamed on the high level of public-sector debt, was badly received in Japan.
wrote about the downgrade in a
separate story .
Increased indications of the willingness of the
Bank of Japan
to intervene to prevent further yen appreciation also kept yen bulls at bay.
The euro/yen rate, which made a series of record lows yesterday, edged higher to open at 92.10.
Sterling has not joined other currencies in gaining ground against the dollar and is 1.5 cents down from yesterday's close at $1.4230. The euro has made further gains as the pound weakens, to open at 61.25 pence.
The pound is now falling on its own momentum. "In the past it's been euro related but today the pound is lower on this morning's data," Hawkins said, referring to a U.K. retail sales survey.
The Swiss franc is a little firmer at 1.7730.The euro/Swiss franc rate is steady at 1.5475.
The Canadian dollar is again trying to push higher and is now at better levels around C$1.4760.
The Australian dollar recovered to around $0.5590, after dropping to a 5-year low yesterday. The market believes that the
Reserve Bank of Australia
intervened yesterday to support its currency. This created concern there will be further intervention if the Aussie trends lower.
The New Zealand dollar edged higher, in line with its Australian counterpart, and is opening at $0.4210.
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