The euro remains in the danger zone, just above last week's lifetime lows. At the opening this morning, the single currency is trading around $0.8370, only a half cent above the record low.
The market is concerned that today's
meeting in Montreal may address exchange rate issues and attempt to talk the euro higher. There is little expectation of intervention, but such a move cannot be ruled out if the euro slides below $0.8350.
"You've always got to be worried over the euro," said Jeremy Hawkins of
Bank of America
in London. "Nobody expects intervention, but the market's got to be cautious," he added.
U.S. Treasury Secretary
reiterated in a TV interview this morning that the U.S.'s strong dollar policy remains unchanged.
The yen has continued yesterday's firmer tone. It is opening at 108.10. Traders are again buying yen in the belief that the 110 target will not be breached on the upside. Since Monday morning, the yen has rallied by about 1%.
These moves are clearly showing in the euro/yen cross rate, which has fallen from 91.50 to 90.40, not far off the record low of 89.50.
Sterling continues to benefit from concerns over the Middle East crisis and the possible implications for oil prices. The pound is very firm against the euro, despite comments from
Bank of England
today indicating that the pound is out of line in euro terms.
"The euro is substantially undervalued in terms of the medium-term fundamentals, so in the same way, sterling is, on most calculations, substantially overvalued against the euro," he said in a speech in Paris.
The Swiss franc has been adversely affected by the ongoing strength of the dollar. It set a new 11-year low at SF1.80 this morning. Currently, the Swiss currency is at SF1.7940 vs. the dollar. In euro terms, the Swiss franc is close to a lifetime high at SF1.5005.
The Canadian dollar is little changed at C$1.5110, as campaigning begins for the general election scheduled for next month.
The fates of the Australian and New Zealand dollars remain largely tied to the euro. Although both currencies are off their near-term lows, they aren't making much progress in a market that still prefers U.S. dollars. The Aussie is opening at $0.5280, and the Kiwi is at $0.4025, both little changed overnight.
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