28 February 2001, 12:51 Forex: Euro firms in early London trade ahead of Greenspan
LONDON (AFX) - The euro strengthened against most leading
currencies in volatile early trade ahead of this afternoon's testimony
by the U.S. Federal Reserve chairman Alan Greenspan to a House of
Representatives committee, dealers said.
They said markets remain focused on the U.S. slowdown, with
investors largely overlooking domestic data.
The euro traded at 0.9204 against the dollar at 9.20 am after
touching a high of 0.9225 usd in early trade.
Turning to Greenspan, dealers anticipate he might deliver a more
cautious speech on the economy. Some hope he will confirm expectations
of a rate cut before the Fed's March 20 meeting.
"Greenspan has re-drafted his speech which seems to indicate that
perhaps he was slightly more optimistic at the Fed's February 13
meeting, than he is going to be today," said Sonja Helleman, currency
strategist at Dresdner Kleinwort Wasserstein.
But whether Greenspan will hint at the potential extent and timing
of a rate cut this afternoon remains to be seen.
"It is all going to be about spot the difference today," Helleman
said.
Price action on euro/sfr, which often gives clues as to euro/dollar
direction, moved higher.
"This seems to indicate that we could have a bit of a respite for
the euro," Helleman said.
Dealers said the next important levels for euro/dollar stood at
0.9240 and 0.9295 usd. "The euro has to break above 0.9295 usd for
better sentiment," they said.
Meanwhile, the dollar strengthened against the yen after the Bank
of Japan cut the overnight and discount rates by 10 basis points each
to 0.15 pct and 0.25 pct respectively, which some economists translated
as the BoJ being ready to return to its zero-rate policy.
Sterling strengthened against the dollar and the yen at the open,
supported by talk of mergers & acquisitions flows, dealers said.
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