Wednesday, October 21, 2009

Euro Rally Concerns Central Bankers

EuroThe euro continued to remain near a 14-month high versus the dollar today, as concerns regarding the current strength of the European common currency start to emerge among ECB officials, since a strong euro could jeopardize economic recovery in its member countries.

A part from currencies based in commodity exporter countries like Brazil and Australia, the euro has been benefiting from the new wave of risk appetite that has been unleashed since signs that the global slump was ending emerged in the first semesters of the current year. Even if European Central Bank officials started to make concerned declarations regarding a strong euro and a weakened dollar, investors are still opting for the euro this week, as companies like Apple Inc. posted much higher profits for the past quarter than expected, making the euro-dollar pair to flirt with the $1.50 level.

As the euro continues to gain, versus the dollar and the pound specially, the European Central Bank may start to consider other effective measures to halt its currency strong rally, as declarations from policy bankers already show a certain degree of concern. According to analysts, market sentiment towards the euro will remain bullish, and it’s unlikely that a trend reversal could take place before the end of the year unless central bankers interventions would be taken.

EUR/USD traded at 1.4967 as of 13:18 GMT from a previous rate of 1.4918 yesterday. EUR/GBP declined to 0.9090 from 0.9130.

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