17 May 2001, 12:25 Forex: Euro slightly firmer in early London after corporate buying
LONDON (AFX) - The euro was slightly firmer in early trade after
corporate buying yesterday was thought to have given a fillip to the
single currency, dealers said.
Dealers said the news that Deutsche Telekom and France Telecom are
to sell their stakes in Sprint could have been behind the euro's rise
of more than half a cent against the dollar.
But they said the single currency's rally was unconvincing and
would prove shortlived.
"Although euro-dollar recovered above 0.88 usd, we keep the view
that the downside risk remains dominant," WestLB economists said.
They said that a benign U.S. consumer price index for April has
fuelled market optimism that the Federal Reserve will continue to cut
interest rates and that the U.S. economy will finally turn the corner.
"Without any key data on the horizon, this kind of market view is
likely to persist, which will hardly allow euro-dollar to move much
higher," the economists said in a research note.
4Cast currency strategist Paul Bednarczyk said yesterday's rise in
U.S. equities will support the dollar, although he does not expect
great movement today.
He was sceptical that news that Deutsche Telekom and France Telecom
are to sell stakes in Sprint could have been behind the euro's rise
yesterday.
"For want of any clear explanation, people are just going with that
theory, but it sounds a bit dodgy to me," Bednarczyk said.
Dealers said today's release of the European Central Bank monthly
report could contain the corrected M3 figures that were held to be
influential in convincing the bank to cut rates unexpectedly last week.
In the UK, sterling tracked the euro slightly higher ahead of the
release of April retail sales figures.
Sales volumes are expected to have risen a seasonally adjusted 0.3
pct from March and 5.3 pct year-on-year, according to the median of 18
analysts' forecasts compiled by AFX News.
Dealers interpreted yesterday's Bank of England quarterly inflation
report and comments from deputy governor Mervyn King as pointing to
another rate cut before long.
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