The euro remains weak as doubts mount that the European Central Bank will be able to persuade other central banks to buy the currency for a second time.
According to US market sources, the Federal Reserve is reluctant to bail out the currency again, particularly with the US presidential election coming up.
The US Treasury is rumoured to believe that two European central banks may have traded on their own accounts before the last round of intervention. If true, that would effectively mean insider trading.
Sources say the intervention was due to go ahead at 1.10 p.m. Frankfurt time on September 22nd but when US officials arrived at their desks one hour earlier, the currency had already taken a jump.
Last night a spokeswoman for the ECB declined to comment on the rumour.
US Treasury charts allegedly show that the lower limit of the euro is around $0.75 and that it is thus unwise to intervene unless the euro is bouncing up from around that level.
If that is the case, it could mean the currency has further to fall over the coming weeks in the absence of significant political pressure, as talk of further intervention has been the euro's only prop since the end of September.
The euro has lingered for the past week below levels where the ECB and its counterparts in Japan, the US, Britain and Canada bought euros four weeks ago.
According to Mr Don Walshe, senior economist at Goodbody Stockbrokers, even the talk of intervention could destabilise the euro given the volatility in stock markets and capital flows.
"The equity markets survived the October wobble and strong equity markets are positive for the dollar. We are still waiting or a fundamental reason to buy the euro. And comments about the possibility of further intervention are merely diverting the markets attention from the fundamentals."
Other economists agree. According to Mr Stephen Gallagher, economist at Societe Generale, the euro will see new lows in coming days.
"The intervention card has been played, and it's over for now," at least as far as a co-ordinated action of major central banks, one senior trader said. "If the ECB steps in, it will be on its own" and may not be successful, he said. The euro was trading around $0.8434 yesterday evening from $0.8404 on Thursday. Over the week, the euro is down 2.3 per cent against the dollar and 1.4 per cent against the yen, its third straight weekly loss against both currencies.
The euro fell to lows of $0.8330 on Wednesday, following remarks from ECB president Mr Wim Duisenberg earlier in the week that suggested the bank would not buy euros soon. On Thursday it bounced a little after Mr Duisenberg said the bank might buy the currency when appropriate. He repeated the euro was "undervalued".
Writing in the German newspaper Die Welt, the chief economist at Deutsche Bank, Mr Norbert Walter, attacked Mr Duisenberg for failing in his responsibilities.
"Someone who is not always and completely vigilant with such responsibility is not doing his job. No one in a position of responsibility can give such a kick to a currency that has been hit by rumours and showing weakness for months."
