Euro Softens in Central Bank's Absence Tuesday November 7, 5:25 PM EST By Atiya Hussain NEW YORK (Reuters) - Europe's common currency softened slightly on Tuesday as the European Central Bank (ECB) took a break from intervening in foreign exchange markets after bolstering the euro over the two previous trading days.

But trading activity was limited and volumes were very light, with market players staying on the sidelines as they awaited the results of U.S. Presidential elections, the tightest in decades.

"People are waiting to see who gets the presidency and the make-up of Congress, but if there is a stock market rally (on Wednesday), the euro will be sold off," said Jeff Yu, currency strategist at Sanwa in New York.

"The only thing that will limit the euro's downside potential is the possibility of ECB intervention," he added.

The euro finished U.S. trade just above 86 cents in late U.S. trade against the dollar (EUR-), slightly weaker on the day. Against the yen the euro held just above 92 yen (EURJPY-), off around half a percent.

Market wariness that the ECB might would once again jump into foreign exchange markets to support the euro helped keep the currency from aggressively probing lower.

The ECB intervened last Friday and again on Monday, acting alone to shore up the beleaguered euro. Six weeks earlier, the Group of Seven major industrialized countries had intervened jointly to prop up the euro.

"The commitment of the ECB to come in remains, while the trend continues to be negative," said John Schein, vice president at Fortis USA.

ALL EYES ON U.S. ELECTIONS

Americans went to the polls on Tuesday, and with the final Reuters/MSNBC tracking poll too close to call, dealers were loath to make any predictions.

"So far it's too soon to tell, everything is a wait-and-see attitude," said Schein.

But David Durrant, currency strategist at Bank Julius Baer in New York, said the dollar could strengthen after the election, regardless of the outcome, as investor risk fades.

"Possibly we are going to see a slightly higher dollar, no matter what the election result is," Durrant said.

The dollar traded choppily against the yen, ending down over a third of a percent just below 107 yen (JPY-). But the greenback stayed away from last week's six-week lows around 106.75 yen.

EURO WEIGHED BY WEAK DATA

Sentiment on the euro soured overnight, as the euro zone's second quarter gross domestic product growth was revised down to 0.8 percent quarter-on-quarter from an original estimate of 0.9 percent.

A report that industrial output from Germany, the region's biggest economy, fell by 1.6 percent overshadowed an earlier report showing Germany's October unemployment rate fell below 9 percent for the first time in six years.

In the absence of central bank intervention, jawboning by euro zone officials offered limited support for their embattled currency.

ECB Chief Economist Otmar Issing said investor confidence in euro zone price stability and growth outlook would end the euro's undervaluation.

French Finance Minister Laurent Fabius said the euro's rise would be in the interests of other parts of the world as well as Europe and that joint central bank intervention to bolster the currency remained an option.

European Monetary Affairs Commissioner Pedro Solbes said there were signs U.S. economic growth was slowing and this could bolster the euro against the dollar.

http://money.iwon.com/jsp/nw/nwdt_rt_top.jsp?cat=TOPBIZ&src=202§ion=news&news_id=reu-37153&date=20001107&alias=/alias/money/cm/nw

-- Martin Thompson (mthom1927@aol.com), November 07, 2000