BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Thursday, 3 January, 2002, 05:41 GMT
Euro soars against major currencies
Euro notes and coins
Euros have been in demand on the currency markets
The euro has rallied strongly on the foreign exchange markets after investors took heart from its mostly trouble-free introduction as a cash currency.

In early Asian trade the currency soared to 119.7 yen - its highest level since August 1999 - before settling back to around 119.45 yen.


Everything is working relatively smoothly, so we are seeing a relief rally in the euro

Michael Klawitter, senior currency strategist, WestLB
On Wednesday the single European currency had posted its biggest ever one-day gains against the pound in early trade, climbing 2.7% to 62.80p before slipping back to 62.40p.

The new currency also reached a two-week high of 90.66 US cents, but then dropped back to 90.40 in Asian trade.

Short-lived gains?

Analysts attributed the single currency's strong performance to the smoother than expected introduction of euro notes and coins, which began on 1 January before the foreign exchange markets opened for the new year.

"So far everything is working relatively smoothly, and so we are seeing a relief rally in the euro," said Michael Klawitter, senior currency strategist at WestLB.

A survey on Wednesday showing that the pace of output decline among eurozone companies slowed during December gave the single currency an added boost.

But analysts stressed that the euro was unlikely to hold onto its gains against the pound and dollar until there was firmer evidence of a sustained economic recovery in mainland Europe.

"The fact is there is more confidence in the UK and in our economic management than there is in euroland and its economic management," Richard Jeffrey, economist at ING Barings told the BBC.

Rate cuts unlikely for now

The introduction of euro notes and coins proceeded with few disruptions on 2 January, the first full working day of the year.

The most serious glitch came when Austria's entire cash machine network went down for two hours due to excessive customer demand for the new euro notes.

An increase in the value of the euro against other world currencies would make goods imported into the eurozone cheaper, helping to drive down inflation.

This would make it easier for the European Central Bank to deliver more interest rate cuts, which some economists argue are urgently needed to stimulate the eurozone's sluggish economy.

The European Central Bank's governing board is due to vote on Thursday on whether or not to change interest rates.

Most economists do not expect a move until after the transition from the old European currencies to the euro is complete.


Key stories

Background

AUDIO VIDEO

FORUM

FACT FILES

INTERACTIVE QUIZ

SPECIAL REPORT

TALKING POINT
See also:

02 Jan 02 | Business
02 Jan 02 | Business
02 Jan 02 | Business
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes