LONDON (AFX) - The euro moved back above 0.94 usd in midday trade, recovering from yesterday's depressed state largely on technical reasons and ahead of the European Central Bank's interest rate decision.
The dust is finally beginning to settle on U.S. Treasury Secretary nominee Paul O'Neill's endorsement of the U.S. government's long-standing strong dollar policy which had initially depressed the euro. Today's reversal indicates that any selling may have been overdone, analysts said.
"There is no fundamental reason for the rise. It is largely technical after yesterday's selling," Razia Khan, economist at Standard Chartered said.
At the same time, few expect the ECB to cut interest rates at its meeting today, she said, noting that the decision is likely to be a non-event.
The biggest move on the day was on the dollar/yen cross in the wake of the O'Neill testimony.
"It looks like the dollar/yen cross is going for a new range," Khan said.
The dollar closed in on the 120 yen level after reaching 17 month highs of around 119 yen.
Further appreciation may not come rapidly, however, unless there is more signs of weakness in the Japanese economy, Khan added. Sterling moved lower after a modest 0.1 pct monthly rise in December retail sales volumes disappointed the market.
The AFX News median of analysts' forecasts was for December sales volumes to have risen a seasonally-adjusted 0.4 pct from November and 4.5 pct year-on-year.
Despite this, the data did not change the benign tone seen in the UK indicators for the week, analysts said.
Elsewhere, the Swiss franc was firmer across the board, aided by corporate related flows.