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With the Columbus Day holiday in the U.S., the forex markets in Europe are predictably quiet. The euro is little changed from preweekend levels, and trading is likely to be muted for the rest of the day.

Traders have a tricky job trying to assess the immediate impact on forex prices of last week's

European Central Bank

interest rate hike and surprisingly robust U.S. data. Further central bank intervention to support the euro remains a threat, and traders expect that any sharp selloff will trigger a response.

"The market's hesitant to go long the dollar for the threat of intervention. On the other hand, there's no buying of euros," said Kirit Shah

of Sanwa International

in London. "It's a stalemate," he added.

Shah sees the softness of the U.S. stock market as a factor in currency traders' thinking but does not feel that it has negatively affected the dollar. "It's possible that the U.S. market is less overvalued than Europe," he observed, adding that "mergers and acquisitions activity is the Achilles heel for Europe." Shah expects capital flows to continue to benefit the U.S. and to support the dollar.

There is a growing perception in the forex markets that the ECB may be under pressure to initiate another interest rate rise in the next couple of months to back up its commitment to boosting the euro.

German Finance Minister

Hans Eichel

has warned that the euro will not do well unless policy coordination between the euro-zone members is stepped up. "The euro demands a completely different extent of policy coordination between finance officials. Otherwise the common currency project won't be successful." These remarks came as the euro once again traded at $0.8690, the very level at which the G7 nations intervened to prop up the currency only two weeks ago. Traders believe further intervention could come as early as this week if the euro slips another 1% or so.

In an interview with a French newspaper today, ECB chief economist

Otmar Issing

offered a rather half-hearted outlook for the currency. "I don't think anyone knows what the equilibrium is," he said when asked if the euro would trade around $0.90.

Last month consumer confidence among Germans fell to its lowest level in more than two years. The index slipped to 96 from 100 in August, with rising oil prices the chief reason for the deteriorating sentiment. There is also evidence that the euro's poor performance is hurting consumers.

The yen is at Friday's closing levels around 108.80. There was some bad news for the Japanese economy in the form of an announcement that the country's 12th largest insurer,

Chiyoda Mutual Life Insurance

, had filed for bankruptcy.

The Swiss franc is steady around SF1.75, supported by expectations that the

Swiss National Bank

may be tempted to hike its interest rates again at its meeting on December 8.

The pound was slightly firmer on speculation that there may still be a chance of further rate rises from the

Bank of England

. U.K. producer prices rose 0.3% in September after a 0.3% decline in August. This was a notch above expectations. Retail price data are due tomorrow and may show a sharp gain.

The ailing Australian and New Zealand dollars are showing few signs of improvement. They continue to trade close to all-time lows. The Aussie is opening at $0.5335, and the Kiwi is at $0.4025.

The South African rand is again under pressure, on reports of further political unrest in neighboring Zimbabwe. The rand has fallen to 7.35/dollar after closing on Friday around 7.29/dollar.