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Currencies: Euro Dragging Other Currencies Down With It


The omens for the euro for this week are not good. Over the weekend, the dollar continued its push higher and recorded new advances across the board.

"It's just a continuation of the move we had last week," said Derek Halpenny of

Bank of Tokyo Mitsubishi

. "The announcement of converting FX interest into euros is not going to have any effect."

Halpenny was referring to a statement from the

European Central Bank

last week that it was buying 2.5 billion euros in what it called a book-balancing exercise.

The euro touched new record lows of $0.8510 in European trading before edging modestly higher to open in New York at $0.8525. While there are no new factors behind this latest move down, the dominant issue in foreign exchange markets is the underlying threat of intervention by the ECB.

With a G7 meeting scheduled for Prague on September 23, there was some feeling that broadly backed intervention might be in the cards. This concern lost impact over the weekend, and traders felt comfortable in bidding the dollar higher.

Halpenny doesn't see the threat of intervention as too much of a concern. "The market is far from short the euro/dollar, and it won't happen until it's a lot more short," he said. Traders now look to the $0.80 level as the area in which intervention becomes probable.

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Euroland consumer prices were unchanged in August, bringing year-on-year inflation down to 2.3%.

With a crucial referendum in Denmark on joining the euro zone only 10 days away, polls suggest that the anti group now has the majority at 48% to 44%. A rejection would seriously damage the standing of the euro zone and give a boost to opponents in many member, and potential member, countries. It could also help to push the euro even lower.

Dollar/yen has resisted the impetus to buy dollars and is lower at 106.80. The sensitive euro/yen relationship has fallen sharply, with the single currency now valued at only 91.30 yen.

The pound is virtually tied to the euro and has weakened alongside the single currency. Sterling is now at a 14-year low against the dollar at $1.3985 and is firmer against the weak euro at 60.70.

The dollar/Swiss franc is drifting higher as the dollar continues to gain. The Swiss franc is opening at 1.7850, after Friday's close at 1.7805. The euro is steady against the Swiss franc at 1.5270.

The Canadian dollar is virtually unchanged at C$1.4850. The currency continues to be mired in a C$1.47 to C$1.49 trading range.


Olympics may be in Sydney, but the Australian dollar created yet another new record low earlier today at $0.5430.

As the euro undermines related currencies, the New Zealand dollar is at $0.4140, simply dragged down by weakness in the euro and the Aussie.

The South African rand touched a new record low of 7.245, having pushed through the old low at 7.205

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