Technical buying helped the euro crawl off new record lows against the dollar and yen reached in Tokyo Thursday, but its prospects were as dim as ever, dealers said.
Investors sent the common European currency to new lows in morning trade as "they were going for stop-loss selling," said Bank of Tokyo-Mitsubishi dealer Kiyoshi Kuzuhara.
Investors were selling the euro at pre-programmed levels after the currency gained no respite in London or New York.
By 2:00 p.m. (0500 GMT) the euro had recovered a touch to $0.8687, off its new low of $0.8630 reached about four hours earlier. It was down from $0.8705 in New York and $0.8818 in Tokyo late Wednesday.
It also plunged against the Japanese currency, diving to a new low of 91.45 yen before picking up to 92.38 by 2:00 p.m. That was down from 93.34 in Tokyo late Wednesday.
The euro inched back up "on short-covering and as investors grew cautious about intervention" by the European Central Bank (ECB), said Asahi Bank dealer Shigeru Nakane.
"But there was no particular lead to buy back the euro," he said.
The euro's latest crisis was sparked by German Chancellor Gerhard Schroeder saying Tuesday that a weak European currency had its advantages.
The euro's slide had benefited German exporters, particularly in eastern Germany, and that "should be a source of satisfaction rather than concern," Schroeder told reporters.
The comments only heightened confusion among investors, with ECB leaders consistently expressing concern at the inflationary implications of the euro's weakness.
"You get someone like the German chancellor saying that a weak euro is fine, and that Germany's economic recovery should be based on exports," said Fuji Bank dealer Hideyuki Tsukamoto.
"Investors are then only going to be tempted to test new lows" in the euro, he said.
There was little prospect of intervention, said research firm IDEAglobal.com in Singapore.
"With ECB intervention an unlikely prospect still, the euro/dollar technical trend remains bearish," it said in a report.
"Rebounds are seen as corrective and will prove to be short-lived given poor sentiment."
Rumors that Asian central banks were cutting their euro holdings also weighed down on the currency, IDEAglobal.com said.
The euro was drawing no benefit from signs of stronger economic activity in Germany, France and other major European economies, the dealers said.
The market was now awaiting the results of a weekend meeting of euro-zone finance ministers in Versailles, outside Paris, they said.
The dollar meanwhile was up at 106.41-43 yen, down from 105.83 in New York and 105.82 yen in Tokyo late Wednesday.
"The dollar rose thanks to buying by trust banks, which had fallen short of the greenback due to a recent rise by the yen," said Dai-ichi Kangyo Fuji Trust Bank dealer Kazuhiro Kaneko.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
