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The euro rebounded from four-year lows Wednesday.
Written by article default Wednesday, 19 May 2010 07:35
Market OverviewThe euro rebounded from four-year lows Wednesday on market speculation that European authorities are preparing a response to the common currency's rapid decline.
The euro spiked against the Swiss franc to CHF1.4190 from around CHF1.4000, and has also gained ground against other currencies. The Swiss National Bank Wednesday declined to comment on speculation about its possible intervention in the foreign exchange market.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 86.799 from 87.124.
The euro had earlier declined to fresh four-month lows as fears escalated that a euro-zone sovereign debt crisis would be worsened by a German ban on certain forms of speculative investments.
The U.S. Federal Reserve Wednesday declined to comment on speculation that the European Central Bank and other major central banks are preparing to intervene in the foreign-exchange markets to prop up the flagging euro.
The ECB also declined to comment earlier Wednesday. The market speculation comes as traders are circulating a report from a U.S. think tank that is said to note that the Group of Seven leading industrial nations are concerned about the speed of the euro's decline against the U.S. dollar.
Elsewhere, minutes from the Bank of England's May meeting showed that the vote to keep key rates at a record low was unanimous, despite modest upward pressures on inflation. The minutes had no immediate impact on sterling.
Market expectation
Investors are waiting for any news on issues surrounding the euro-zone sovereign debt crisis, said analysts, and more clarification on Germany's announcement that it would ban certain forms of speculative investments, which has rippled across financial markets. The uncertainty has led to extremely volatile trading, they said.
Analysts have been generally uncertain on just how the ban by the German regulator BaFin will trickle through to the 16-country currency. Investors are unsure exactly which instruments will be affected, and many fear that similar legislation could be enforced elsewhere in the euro zone. That is jangling already frayed nerves, and with negative positions in debt now more difficult to place, the euro had taken most of the strain before its morning recovery.