The euro bounced back here Tuesday amid concern that the G20 meeting in Montreal later in the day could result in intervention to boost the currency.
The single European currency bought 0.8386 dollars from 0.8366 dollars in Tokyo and 0.8350 dollars in New York late on Monday. The euro traded at 90.69 yen from 90.36 yen in New York.
The dollar was quoted at 108.15 yen from 108.25 yen.
But it was the euro that preoccupied market players again. Investors have not forgotten that the last intervention effort to support the euro on September 22 occurred on the eve of a Group of Seven (G7) meeting.
Canadian Imperial Bank of Commerce economist Audrey Childe-Freemen said that the market was waiting to see if the US government would step in with some words of support for the euro at the meeting of the Group of Twenty (G20) industrialized nations.
"If they have nothing to say and decide to focus instead on their domestic situation, the market will test the euro's downside," she said.
Even if the G20 meeting did produce fresh efforts to talk up the single European currency, unless such rhetoric was backed up by action the currency would be likely to weaken again, Westpac Banking Corp economist Richard Franulovich said.
The euro had fallen as low as 0.8344 dollars earlier in the session in Asia, just 0.14 cents away from its historic low of 0.833 dollars reached on October 18.
Tuesday's slump followed comments from French President Jacques Chirac signalling a lack of concern about the euro's weakness.
"The euro is not an element of concern for us," Chirac said in Beijing after talks with Chinese Prime Minister Zhu Rongji on Monday.
Although the French president was in fact expressing confidence in the single European currency's prospects, the market interpreted his comments as a sign of indifference and pushed the euro lower.
Further downward pressure on the single European currency emerged Tuesday from a report by six leading economic research institutes predicting that growth in the 11-nation euro zone would slow markedly to 2.8 percent next year as a result of the rise in oil prices and higher interest rates.
The institutes said they did not see the euro gaining in value "significantly" in the short term, and also forecast that euro-zone inflation would remain above the European Central Bank's ceiling of two percent next year.
But it said that consumer price inflation might fall back below two percent in individual months, reducing the need for further interest rate rises.
The euro was changing hands at 0.8386 dollars against 0.8350 in New York on Monday, 90.69 yen (90.36), 0.5764 pounds sterling (0.5743) and 1.5024 Swiss francs (1.5018).
The dollar was buying 108.15 yen (108.24) and 1.7917 Swiss francs (1.7992).
Sterling was being exchanged at 1.4541 dollars (1.4528), 157.21 yen (157.29) and 2.6048 Swiss francs (2.6130).
The price of an ounce of gold fell to 270.35 dollars on the London Bullion Market, from 271.45 dollars on Monday – LONDON (AFP)
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