The EUR-USD short covering rally extended above 1.4100, with the market gunning for stops above 1.4110-20 and at 1.4130-50. An Eastern European name that bought heavily overnight was reported through 1.4100, although euro shorts in general have pared back positions after overnight news that China may cut some of its USD reserves. Also benefiting the euro is talk that the Lehman Brothers situation will draw to a close by the end of the weekend, fueling a good bid in the euro crosses that we subjected to heavy carry trade unwinding, like EUR-JPY and EUR-CHF. Meanwhile, there are European market rumours that Lehman Brothers will make an announcement at 11:00GMT, but these reports are unsubstantiated at this time.
