Germany's top banker threatens intervention to prop up euro

The Associated Press

FRANKFURT, Germany (October 31, 2000 9:20 a.m. EST http://www.nandotimes.com) - In a move that could further propel the beleaguered euro's tenuous rebound, Germany's top central banker issued a new threat of money market intervention Tuesday.

"We are monitoring the situation in foreign exchange markets closely and will intervene again, if necessary," said Ernst Welteke in article published in this week's German magazine Wirtschaftswoche.

As president of Germany's Bundesbank, Welteke also sits on governing board of the European Central Bank, which makes monetary policy for the 11 European Union countries using the region's common currency, the euro.

Welteke blamed the euro's weakness, in part, on mixed signals sent by European leaders who do not always coordinate comments as well as Welteke would like.

"An improved political cooperation would make an important contribution to a successful monetary union," Welteke said in the report.

In September, when the euro tumbled through the 85-cent level, the ECB and other allies launched a synchronized strike to buy euros and boost the sagging currency.

Economists and money traders speculated another intervention was in the works last week when the euro bottomed out at a new all-time low under 83 cents.

But weak U.S. economic growth figures released last Thursday caused the euro to rally. It has been trading above 84 cents since then.

Economists say a coordinated intervention could still help bolster that rebound, however.

When the ECB shows itself willing to intervene in currency markets and buy euros, money traders are less willing to sell euros for fear of being caught empty-handed if a big buyer for the currency suddenly emerges.

http://www.nandotimes.com/business/story/0,1032,500274651-500429143-502704691-0,00.html

-- Martin Thompson (mthom1927@aol.com), November 01, 2000