Reply #27: Euro pressured by ECB intervention talk

[UpInArms]

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?pv_noticia=1100190760-9e32d306-41814

excerpt:

In light of the objections, the markets are on the lookout for possible euro selling and dollar buying from the European Central Bank

"It's clearly on the agenda and we are now entering the zone of actual market intervention," said Neil Mackinnon, chief economist at ECU Group

"By pushing the euro through 1.30 usd, investors should be on alert, for we are close to the (ECB's) pain threshold," he added

The ECB's last foray onto foreign exchange markets was in late 2000. At the time it acted in coordination with other G7 countries to buy euros and sell dollars after the eurozone unit plunged to a record low of 0.8230 usd

The US monetary authorities are unlikely to get involved and are widely believed to be in favour of a managed depreciation in the dollar

"The perception that the US favours a weaker dollar to help rectify the huge current account imbalance contrasts sharply with the European policy stance and is likely to become an increasing source of friction over coming weeks," said Mitul Kotecha, senior currency strategist at CALYON

Though US officials have been notably silent about the dollar developments, alarm bells appear to have been rung at the Bank of Japan, which has a reputation for intervening in the market to stem the yen's appreciation. "We can't rule out joint intervention between the ECB and the BoJ," said ECU Group's Mackinnon

...more...