The euro has continued to hold above $0.88 as traders fear another round of intervention. Comments from a series of central bankers and politicians about intervention meant the currency traded in a very narrow range against the dollar.

The euro closed in European trade at $0.8815 having traded as low as $0.8743 and as high as $0.8833.

According to Mr John Beggs, chief economist at AIB, comments from the Bank of Japan and others reminded traders that selling the currency could lead to losses.

Governor of the Bank of Japan, Mr Masuri Hayami, said he was happy about the movements in the euro this week and he felt co-ordinated intervention was extremely well timed.

"The euro exchange markets have normalised considerably."

The French Prime Minister, Mr Lionel Jospin, also came out to bolster the euro stating that further intervention remained a possibility. "What can be done once can be done again."

"Concern about another intervention is quite strong", dissuading investors and traders from selling the currency, said Mr Masayuki Yamamoto, assistant vice president for foreign exchange at Bank of America in Tokyo.

Meanwhile, sterling remained broadly stable against the dollar and the euro. Bank of England Monetary Policy Committee member Dr Sushil Wadhwani warned in Dublin last night that interest rates were likely to remain stable in the UK. Mr Beggs said this would put a lid on further sterling appreciation.

Addressing the Financial Services Industry Association, Dr Wadhwani said the Bank of England would not automatically raise interest rates because inflation forecasts seemed to be high.

In its most recent bulletin the bank said the inflation forecast was low for the next 18 months but was set to rise to above its 2.5 target in two years. But Dr Wadhwani tried to dampen expectations that that means a possible rate rise.

"There is no mechanical link between the two-year inflation forecasts and the decision to raise interest rates."

He also pointed out that a one year inflation forecast could be more accurate than that for two years, particularly at a time of structural change.

There were mixed signals on the European economy yesterday.

French consumer spending declined in August at the steepest pace in almost four years, after rising in July - the latest evidence that economic growth may be slowing in the euro zone.

The purchasing power of shoppers in France, the region's second largest economy, has been eroded by soaring oil costs.

Six rate rises in 10 months have also curbed purchases by making credit loans more expensive.

The Italian and Dutch governments reported sliding consumer confidence in September.