The euro resumes its climb against the dollar yesterday to a level last seen in September, benefiting from concerns over international tensions, terrorist attacks and the speed of the US economic and corporate recovery. The currency hit $0.9266 from $0.9193 late on Tuesday in New York.
But in afternoon trading the euro soared as high as $0.9276, a level last reached by the European currency in September. The dollar was trading at 124.17 yen compared with 124.15 on Tuesday.
BNP Paribas currency strategist Mr Ian Stannard said: "The euro is continuing to benefit from dollar weakness and we see it pushing ahead." He said worries about the sustainability of the US recovery, corporate profits and the shift in US government policy to a more interventionist policy, could help propel the euro over the $0.93 level within a week.
Canadian Imperial Bank of Commerce economist Ms Audrey Childe-Freeman agreed, noting that the threats of terrorist attacks on the United States this year have led to safe-haven flows into the euro, even though a similar trend was not apparent following the September 11th attacks.
"People are no longer buying the dollar, which underlines the change in sentiment towards the dollar," she said. "Whilst the trend remains favourable for the euro, it remains principally the result of broad dollar weakness and not the result of any positive news out of Europe," she added.
The dollar eased off earlier gains against the yen after the Bank of Japan stepped into currency markets to sell yen for dollars in a bid to halt the recent rise of the Japanese currency.
The Japanese central bank's decision to intervene for the first time in eight months followed a recent surge in the value of the Japanese unit, which has gained about 8 per cent in just three months against the dollar to trade at its highest level since December.
However, many analysts were sceptical the Japanese would succeed in capping the yen's rise over the longer term. "For the time being it should limit the slide in dollar/yen but I don't think in isolation it's going to change sentiment towards the dollar," Ms Childe-Freeman said.
Explaining the BoJ's move, Finance Minister Mr Masajuro Shiokawa said in a statement that the recent movement of the exchange rate had been "too rapid". "We have taken appropriate action today in the exchange market," Mr Shiokawa said, adding that the Japanese authorities would continue to closely monitor the market and take "appropriate action as necessary".
The intervention had only modest success, driving the dollar up from 123.6 yen to 125 yen. But by the middle of the New York session, the dollar was back down to 124.2 yen. Some analysts said this was partly due to a contradiction in the recent pronouncements of the Japanese authorities.The disappointing response to yesterday's intervention shows that the Japanese authorities are likely to have to try harder if they want to stop the yen moving higher.
