European Central Bank

, after weeks of chatter, finally intervened today to prop up the sinking euro. The move was made in conjunction with U.S. and Japanese monetary authorities.

The intervention on behalf of the currency has propped up the euro against the dollar and the yen this morning.

Before the intervention, the euro was trading above $0.8500 and the central bank's buying immediately propelled the single currency to highs of $0.9015, a gain of more than 5%. Led by the

European Central Bank

, the other countries involved in the market action included, the USA, Japan and the U.K. This is the first time since 1995 that broad-based intervention of this magnitude has been undertaken.

Since the intervention, the euro has slipped back a little and is now trading around $0.8835.

The euro has been structurally weak ever since its inception at the beginning of 1999, and most lately people had become concerned with the detrimental effects on other economies. It was thought that the euro's weakness was not related to Europe's economic fundamentals, but lately stories of economic pressure brought on by high oil prices have changed that sentiment.

Most recently, U.S. chip maker


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warned of pressure on third quarter earnings because of weakened demand in Europe. High-tech companies often do business in dollars, and for Europeans, the dollar is quite expensive now, hurting demand.

This is the first three-pronged coordinated intervention since 1995, when U.S., German and Japanese authorities intervened in the foreign markets.

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"On the initiative of the European Central Bank, the monetary authorities of the United States and Japan joined with the European Central Bank in concerted intervention in exchange markets because of their shared concern about the potential implications of recent movements in the euro exchange rate for the world economy," the ECB's statement said this morning.

"It's about time and it's an important step," said Tamiko Bayliss of


in London. "The market will try to push it lower and they must come back in with further intervention during the day."

Clearly the goal of the intervention is to counter the forex market's negative view of the euro and to make speculators pay a price for their short euro positions. The market might have expected such intervention after this weekend's G7 meeting of world leaders. The ECB has scored a quick victory by striking ahead of the meeting.

The ECB said it was taking this action as a result of concern that the euro's decline was having political implications. Some observers were openly asking if the euro could continue to survive faced with a seemingly permanent downward trend. This aggressive action is, at least partially, an attempt to counter the growing "no" faction in Denmark that doesn't want the country to join the single currency. The country holds a referendum on membership in the euro zone next week.

Only yesterday, the ECB made some particularly sharp comments on the the forex market's treatment of its currency. "Exchange rate developments appear to be increasingly out of line with global current account developments in the balance of payments," said the bank's latest monthly report.

The yen has been pushed down against the dollar as a result of euro buying and is now around 107.05. As traders buy euros, the sensitive euro/yen cross-rate has come off sharply and now stands at 93.60, compared with 91.40 at the New York close yesterday. This cross has gained about 5% in the past two days.

Sterling is also solidly firmer at $1.4630. The euro made no headway against the pound, as the market simply sells dollars.

The weak currencies around the world--the Australian dollar, New Zealand dollar and South African rand, have all benefited from the central bank activity and are sharply higher than yesterday. The Canadian dollar, on the other hand, is weaker against the U.S. dollar at C$1.4900.

The forex market will now watch to see how willing the European Central Bank and other banks are to keep supporting the euro. As Tamiko Bayliss said: " This is only the beginning of turning the euro around."

took a close look at the

embattled euro in a separate story.