BERLIN -- It's been a rocky couple of weeks for the euro, but the coming week might finally give the battered currency a chance to begin to return to a relative state of normalcy.
Only two weeks since the world's most powerful central banks intervened in the foreign-exchange markets to prop up the currency, the euro even weathered the Danish euro referendum last Thursday, with the fussy Danes voting by a larger-than-expected margin to spurn the euro in favor of their familiar krone.
Next week will certainly see plenty of pundits and observers continuing to speculate what the longer-term effects of that rejection might mean for the euro and the European Union, but the threat of further intervention by the
European Central Bank
appears to have helped the euro find its legs.
That could help U.S. companies with operations in Europe, which have watched the euro's fall erode profits. In recent weeks, euro-related problems have helped prompt earnings warnings from companies including
Although the decision to reject the euro is a heavy blow psychologically to the currency's supporters, in the immediate aftermath of the Danish referendum, the euro has remained resilient. Late in European trading session Friday, the euro was up slightly to $0.8842.
"The euro has mostly priced in the bad news -- even the Danish no vote," says Robert Halver an investment strategist for Delbrueck Asset Management in Frankfurt. "Plus, the ECB won't stand for another drastic depreciation,
meaning the one-way street of dollar appreciation" is probably over.
Despite that, the Danish vote has proved that the euro's expansion can be derailed on strictly political grounds, even if it might make sense economically. Down the road a bit, the Danes' decision could strengthen the euro-skeptic forces in both Sweden and the U.K., which are the only other EU members set to remain outside the eurozone.
Although ECB officials have already expressed their regret over the Danish snub,
President Wim Duisenberg
will have another chance Thursday when the bank's governing council convenes to set monetary policy for the euro area. A change next week is considered unlikely, however, and many observers expect a rate hike before the year's end.
Elsewhere, European equity markets will get off to a slow start next week with Germany shut on Tuesday for a holiday to celebrate 10 years of German unification. That means the largest Continental stock market will be running on a skeleton staff Monday, as many traders in Frankfurt take a four-day weekend.
Many at the Frankfurt-based ECB will likely take some time off as well, but you can be sure there'll be plenty of central bankers closely watching the euro's fledgling recovery.