The value of the euro against the dollar has dropped below the level at which it was launched on January 1, 2002. Federal Reserve chief Alan Greenspan was relatively positive in his assesment of the Eurozone economy.
Big bank, small change
Some said the euro's losses were due to fading hopes for an early rate cut after a speech from European Central Bank President Wim Duisenberg on Wednesday. Others reported euro selling from European banks supposedly hedging exposure to Argentina.
But most suspected the losses were simply the result of a failed bet as waves of sales were forced on the currency when it stood at $0.8840 and $0.8820 on Wednesday. Much of the drop had come in the space of only 15 minutes.
Wim Duisenberg’s comments, in his capacity as head of the European Central Bank, had certainly not helped matters. He had addressed a European parliamentary committee on Wednesday.
Mr Duisenberg signalled interest rates were likely to remain on hold and expressed uncertainty about the timing and strength of any upturn in the eurozone economy.
At 11:18 GMT the euro was at $0.8760 after skidding all the way from a $0.8890 high on Wednesday. It was also nearly a third of a percent lower against the yen around 117.60.
"The euro's going to remain under pressure and is heading toward $0.8730 which is key support," ," Ian Stannard, foreign exchange strategist at BNP Paribas said in an interview with Reuters.
The euro was steady on Thursday as expectations grew that the Federal Reserve would deliver a relatively upbeat assessment of the economy. It did.
Federal Reserve chief Alan Greenspan said the economy underwent a "significant cyclical adjustment" last year, worsened by the Sept. 11 attacks.
"But there have been signs recently that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm," he said.
The euro exchange rate currently stands at 0.8764 against the Dollar. It could go down further.
"The euro's one of the currencies that can never just stay steady; if it's not going up then it's going down," a European bank dealer in Tokyo told the Reuters news agency.
The question forming on people’s lips is: if it’s not going up, how far can it go down?