Fed Joins Intervention to Support Euro
By Knut Engelmann
WASHINGTON (Reuters) - The United States said on Friday it had joined Japan and Europe to buy euros on world foreign exchange markets to support the ailing currency, defying market expectations that it would not step in.
``At the initiative of the European Central Bank the monetary authorities of the United States and Japan joined with the European Central Bank in concerted intervention in exchange markets because of their shared concern about the potential implications of recent movements in the euro for the world economy,'' a Treasury spokeswoman told Reuters.
The intervention, on the eve of a meeting of the Group of Seven industrialized nations in Prague, pushed the euro up more than 5 percent on the day against the dollar, sending it above $0.90 (EUR-) for the first time since September 4. The euro gave up some ground and was trading at $0.89 later.
The European Central Bank said earlier on Friday that U.S. and Japanese authorities had joined it in intervention because of concern over the potential implications of recent euro moves.
Analysts believed the fact that the central banks acted in concert sent a positive signal to euro markets. They said the big surprise was the U.S. willingness to join the effort.
``It's changed the market's perception of the U.S. approach,'' said Allison Cottrell of PaineWebber International in London. ``That's the big surprise factor.''
The U.S. Treasury did not specify how much it spent on intervention, but said it used its own funds for the action, a Treasury official said. The official did not spell out why the United States decided to help prop up the floundering currency.
Treasury Secretary Lawrence Summers was due to hold a news conference later on Friday in Washington.
The single currency has fallen to record lows in recent weeks against the dollar, the yen and the Swiss franc and had lost nearly 30 percent against the U.S. currency since its launch.
By Knut Engelmann
WASHINGTON (Reuters) - The United States said on Friday it had joined Japan and Europe to buy euros on world foreign exchange markets to support the ailing currency, defying market expectations that it would not step in.
``At the initiative of the European Central Bank the monetary authorities of the United States and Japan joined with the European Central Bank in concerted intervention in exchange markets because of their shared concern about the potential implications of recent movements in the euro for the world economy,'' a Treasury spokeswoman told Reuters.
The intervention, on the eve of a meeting of the Group of Seven industrialized nations in Prague, pushed the euro up more than 5 percent on the day against the dollar, sending it above $0.90 (EUR-) for the first time since September 4. The euro gave up some ground and was trading at $0.89 later.
The European Central Bank said earlier on Friday that U.S. and Japanese authorities had joined it in intervention because of concern over the potential implications of recent euro moves.
Analysts believed the fact that the central banks acted in concert sent a positive signal to euro markets. They said the big surprise was the U.S. willingness to join the effort.
``It's changed the market's perception of the U.S. approach,'' said Allison Cottrell of PaineWebber International in London. ``That's the big surprise factor.''
The U.S. Treasury did not specify how much it spent on intervention, but said it used its own funds for the action, a Treasury official said. The official did not spell out why the United States decided to help prop up the floundering currency.
Treasury Secretary Lawrence Summers was due to hold a news conference later on Friday in Washington.
The single currency has fallen to record lows in recent weeks against the dollar, the yen and the Swiss franc and had lost nearly 30 percent against the U.S. currency since its launch.
