WSJ:WORLD FOREX: Euro Sags As EU Finance Ministers' Meeting Starts
-- Euro back under pressure as initial euphoria over Thursday's central bank move recedes
-- Nervousness prevails as EU finance ministers gather in Poland
-- Europe's emerging market currencies under pressure against dollar
By Clare Connaghan
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The euro wilted again against the dollar Friday as the previous day's euphoria over co-ordinated central bank action to pump dollars into the European banking system faded and as caution set in ahead of a meeting of European finance ministers.
The 17-country currency is almost back where it stood against the dollar before the European Central Bank, in conjunction with the Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank, announced it would conduct three dollar-liquidity operations with a three-month maturity covering the end of the year.
"The fact that the central banks took action again shows that the tensions on the interbank forwards market [which permits banks to hedge their positions in the longer run] are considerable," said currency strategists at Commerzbank in a note to clients, while adding that more was needed to support the euro in a sustained way.
"Such a development will not be possible until the news on the [euro zone's] peripheral debt crisis becomes more favorable."
As a result, markets turned their attention to Europe's Economic and Financial Affairs Council meeting, also known as Ecofin, kicking off in Poland, with U.S. Treasury Secretary Timothy Geithner also attending.
Market participants, though, said they weren't expecting big things from the meeting.
"We'll probably hear a reaffirmed promise to expand the European Financial Stability Facility and governments will do what's needed to improve government finances but I can't see it being a big game changer," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole in London.
On the data front, a University of Michigan consumer survey will be released at 1355 GMT. Also on market radar screens is the conclusion of Moody's Ratings Service Inc.'s three-month review of Italy's sovereign credit rating.
For now, a cautious tone prevails.
The dollar was steady against the yen, while the pound bounced back against the buck after coming under early pressure following comments from Bank of England Deputy Governor Charles Bean that he will look again at the case for further asset purchases when the central bank's policy committee meets next month.
The buck also lost some ground against the commodity-linked currencies of Australia and New Zealand.
In Europe's emerging markets, currencies were mostly weaker, with the Hungarian forint among the biggest losers.
The South African rand, which typically trades in line with eastern European currencies, was also under pressure against the dollar, while the Turkish lira held up relatively well against the buck.
At 1054 GMT, the euro was trading at $1.3820 against the dollar, compared with $1.3875 late Thursday in New York, according to trading system EBS. The dollar was at Y76.700 against the yen, compared with Y76.70, while the euro was at Y105.990 compared with Y106.45. The pound was at $1.5831 against the dollar, compared with $1.5804 late Thursday in New York.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 76.555 compared with 76.290 late Thursday in New York.
