- The foreign exchanges were thrown into fresh turmoil
last night after a report that the European Central Bank had set a $1.35
intervention level pushed the euro to new highs against the dollar.
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- After another battering, the dollar finished the day
at more than $1.24 to the euro for the first time, while the Bank of England's
hawkish noises about UK interest rates helped to propel the pound to an
11-year high.
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- The ECB refused to comment on a news agency report that
it would not step in to halt the euro's rise until it hit $1.35 or unless
the decline in the dollar became a disorderly rout.
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- A spokesman said: "We don't comment on market rumours."
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- Foreign exchange dealers said the report, sourced to
an ECB official, had been enough to prompt a fresh downward move in the
dollar against all major currencies.
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- "Things were relatively quiet this morning until
this story came out suggesting from ECB sources that they did not see the
need for any intervention unless the euro got to $1.35 - and of course,
whenever you put a number out there the markets get very excited,"
said Robert Sinche, global head of currency strategy at Citibank in New
York.
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- Analysts at Dutch bank ING said that if the report were
true it risked "triggering a disorderly rise in the euro as traders
are presented with a one-way bet. Even leaving aside the ECB's complacency
about the economic damage caused by the euro's appreciation ... this story
seems to betray a startling complacency about the behaviour of the financial
markets".
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- Sterling extended its recent gains against the dollar,
closing just above $1.76, its highest since October 1992. In addition to
the sustained selling pressure on the dollar, the pound was boosted by
the minutes of the meeting of the Bank's monetary policy committee this
month, which showed a bias towards higher interest rates. One of the members,
Sir Andrew Large, voted for an immediate quarter-point increase to 4%.
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- The minutes said most MPC members preferred to wait and
see how the rise in borrowing costs to 3.75% affected the economy. "If
the economy continued to evolve in line with the committee's central projections,
a further increase would be warranted at some point. But the news was not
yet sufficient to justify another increase."
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- http://www.guardian.co.uk/business/story/0,3604,1109262,00.html
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