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Monday, January 12, 2004

Euro Reaches New High During The Day

There is nothing really especially important in this, since it is set to continue dayu after day at the moment. It is interesting however to watch M. Trichet trying to find a way to position himself. Today he said that "brutal moves'' in the currency are unwelcome. Now the market is trying to decide how to define the word brutal:

The euro fell from a record high against the dollar in New York after European Central Bank President Jean-Claude Trichet said ``brutal moves'' in the 12- nation currency are unwelcome.

Traders drove the euro almost half a cent lower in five minutes after Trichet said ``we're certainly not indifferent'' to the euro's 22 percent rally in the past year. He spoke following a meeting of central bankers in Basel, Switzerland, after the euro touched an all-time high of $1.2899 earlier today.

``The ECB is finally expressing some concern about the appreciation of the euro,'' said David Durrant, chief currency strategist in New York at Bank Julius Baer & Co., with about $87 billion in assets, in a televised interview with Bloomberg News. The remarks may be ``a catalyst that creates the pause'' in the euro's rally, Durrant said.

Europe's common currency sank to $1.28 at 10:14 a.m. in New York, from 1.2818 late Friday, according to EBS prices. It dropped to 136.48 yen from 136.90 on Friday, when it reached the strongest since July. The euro has set record highs against the dollar on 11 of the past 18 trading days.

Trichet on Thursday said rising demand for European exports was tempering the impact of the strengthening euro. Those remarks ignited a rally in the currency as traders interpreted them to mean the central bank wasn't about to halt the advance.

"There's much more candor in his comments'' today, said Richard Franulovich, a currency strategist in New York at Westpac Banking Corp. The ECB can "slow the trend, but they can't stop it.'' He predicts the euro will climb to $1.35 in six months.
Source: Bloomberg

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