have been in demand on the currency markets
euro has rallied strongly on the foreign exchange markets after investors
took heart from its mostly trouble-free introduction as a cash currency.
In early Asian trade the currency soared to
119.7 yen - its highest level since August 1999 - before settling back to
around 119.45 yen.
is working relatively smoothly, so we are seeing a relief rally in the
Klawitter, senior currency strategist, WestLB
On Wednesday the single European currency
had posted its biggest ever one-day gains against the pound in early trade,
climbing 2.7% to 62.80p before slipping back to 62.40p.
The new currency also reached a two-week
high of 90.66 US cents, but then dropped back to 90.40 in Asian trade.
Analysts attributed the single currency's
strong performance to the smoother than expected introduction of euro notes
and coins, which began on 1 January before the foreign exchange markets
opened for the new year.
"So far everything is working
relatively smoothly, and so we are seeing a relief rally in the euro,"
said Michael Klawitter, senior currency strategist at WestLB.
A survey on Wednesday showing that the pace
of output decline among eurozone companies slowed during December gave the
single currency an added boost.
But analysts stressed that the euro was
unlikely to hold onto its gains against the pound and dollar until there was
firmer evidence of a sustained economic recovery in mainland Europe.
"The fact is there is more confidence
in the UK and in our economic management than there is in euroland and its
economic management," Richard Jeffrey, economist at ING Barings told the
Rate cuts unlikely for now
The introduction of euro notes and coins
proceeded with few disruptions on 2 January, the first full working day of
The most serious glitch came when Austria's
entire cash machine network went down for two hours due to excessive customer
demand for the new euro notes.
An increase in the value of the euro
against other world currencies would make goods imported into the eurozone
cheaper, helping to drive down inflation.
This would make it easier for the European
Central Bank to deliver more interest rate cuts, which some economists argue
are urgently needed to stimulate the eurozone's sluggish economy.
The European Central Bank's governing board
is due to vote on Thursday on whether or not to change interest rates.
Most economists do not expect a move until after
the transition from the old European currencies to the euro is complete.
from bbc.co.uk: 3.1.02