The euro was back under pressure on Thursday, as the short covering that drove an unexpectedly sharp rally for the troubled currency in the previous session dried up.
One of the triggers for Wednesday’s rally back above $1.24 from a four-year low of $1.2142, was a rumour in the market that the European Central Bank could intervene to help prop up the euro from disorderly decline. This followed suggestions that the Swiss National Bank had been acting in the market to curb its excessive appreciation against the single currency in recent weeks.
“Speculation of ECB intervention at this stage is unfounded,” said Hans Redeker at BNP Paribas. “Finance ministers [according to EU official Jean-Claude Juncker] are not concerned by the level of the euro, although they are watching the pace of the decline carefully.”
The euro fell 0.5 per cent to $1.4381 versus the dollar in London morning trade on Thursday as focus returned to the realities of the eurozone sovereign debt crisis.
Next on the agenda will be Germany’s parliamentary vote on its contribution to the €750bn European Union-International Monetary Fund bail-out package on Friday.
Meanwhile, the market was also steadied after Spain successfully sold €3.52bn in 10-year bonds at a yield of 4.045 per cent. Although this was 190 basis points higher than the 3.855 per cent yield at an auction of the same maturities two months ago, it was well below this year’s peak at nearly 4.8 per cent.
The euro climbed against the Swiss franc as speculation of further intervention kept the currency supported. The euro climbed 0.4 per cent to SFr1.4244. It was also higher against a broadly weaker pound, up 0.3 per cent to £0.8621.
It was down, however, against the yen, as the Japanese currency continued to gain favour as a haven from market volatility – off 1 per cent to Y112.99. The yen also climbed versus the dollar, up 0.5 per cent to Y91.35.
Taking the biggest battering on Thursday, however, was the Australian dollar, which along with its commodity-linked peers, fell on concerns over the impact on demand from the eurozone debt fallout and Chinese fiscal tightening.
Against its US counterpart, the Aussie dollar was down 2.2 per cent $0.8308, and fell 2.8 per cent to Y75.79.
Canada’s dollar was also weak, down 1.3 per cent against its neighbour at C$1.0545. Meanwhile, the Norwegian krone fell 1.1 per cent to NKr6.4449 against the dollar.
Sterling found little support from retail sales data that were in line with weak forecasts. The pound fell 0.7 per cent to $1.4367 against the dollar, and by 1.1 per cent to Y131.27 versus the yen.
