19 October 2001, 17:06 Euro/dollar eases after Ifo survey but also range-bound
By Allen Sykora
Chicago, Oct. 19 (FWN) - A weak German business sentiment index has
put some pressure on the euro this morning, particularly in the wake of
the European Central Bank's recent reluctance to trim interest rates,
sources said.
The euro has hit a low for the day of 89.82, its weakest level since
Sept. 11, the day that terrorists crashed hijacked jetliners into New
York's World Trade Center and the Pentagon in Washington. Nevertheless,
market watchers described euro/dollar as largely range-bound, with further
dollar gains limited by the anthrax scares in the U.S.
"The main feature today is we had the Ifo number in Germany drop to
its lowest level in eight years," said Andy Busch, senior forex adviser
with Bank of Montreal. "The dollar has strengthened on that."
Michael Donahue, vice president with Fimat, also cited weak confidence
in the German economy, as well as the lack of ECB action lately to address
the situation. The ECB not only left interest rates alone last week, but
some ECB members have made comments suggesting that current policy was
appropriate.
"A lot of people thought we'd see some dollar weakness in response to
these anthrax scares (in the U.S.)," said Donahue. "But it's overshadowed
by the ECB."
Sources do describe the market as largely range-bound at the moment,
with the euro slightly softer due to the worries about the German economy,
but with the continuing anthrax scares capping the dollar's upside
potential.
"It looks like we're fairly dead in the water here," said Busch. "I
think it will be very difficult for anyone to buy U.S. assets when the
government is essentially in exile here."
He was referring to the shutdown of the House of Representatives and
limited number of senators who have shown up in the Capitol building, as
investigators sweep through the Capitol complex looking for signs of
anthrax spores after earlier discoveries.
Overall, said Donahue, "there is not too much interest in the market,
so it's range-bound."
The euro is currently trading around 90.06 U.S. cents, compared to the
late-Thursday North American level of 90.35.
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