ECB gets taste for intervention

Has the European Central Bank got carried away with itself? Not content with a week in which the euro rose encouragingly against both the dollar and sterling, the ECB has decided to inject some pace into the recovery with a second dose of intervention in six weeks.

Before yesterday's move, the currency was up two US cents against the dollar and 1.4p sterling against the British currency this week. It had rallied on a feeling in the markets that a US slowdown could bode well for the direction of capital flows, an issue seen to be at the heart of the euro's malaise.

Still intervention just four days before US presidential elections came as a surprise, especially given ECB president Wim Duisenberg's recent gaffe and a deadpan press conference after the ECB governing council meeting on Thursday.

Surprising too that the ECB decided to go it alone. The belief in the markets has been that only a concerted effort could lift the euro. Indeed, such an effort in September only succeeded in bolstering the battered currency briefly.

No surprise then that two interventions by the ECB inspired only the briefest rally as high as 88 US cents before the currency fell back to its Thursday closing levels.