11/10 13:11 Euro Declines as the ECB Refrains From Buying More Currency By Mark Tannenbaum

New York, Nov. 10 (Bloomberg) -- The euro fell as the European Central Bank refrained from buying the currency today to lend it support, as it's done three days in the past week.

The end of European trading hours convinced investors the day would pass with no further intervention. Few expected the euro to sink far against the dollar given the stalemate in the U.S. presidential election, which some said was souring international investors on U.S. stocks and the U.S. currency.

``Once the ECB goes home, so to speak, the market has a bit more freedom to sell'' euros, said Andrew Delano, a currency analyst at IDEAglobal.com. ``It seems when European hours end, one risk does appear to diminish a bit in the market's eyes.''

The euro fell to 86.26 U.S. cents, from 86.66 cents yesterday. It earlier reached a high of 87 cents on speculation the ECB would buy euros, as it did on Friday last week, as well as on Monday and yesterday. The currency dropped 0.5 percent against the dollar this week.

The common European currency fell to its lowest level of the day as James A. Baker III, an adviser to Republican presidential candidate George W. Bush, said a recount of Florida votes showed Bush won the presidency, and said a call for further recounts by Democratic candidate Al Gore was not ``responsible.''

An unofficial Associated Press tally of the recount has Bush winning Florida. Leading up to Tuesday's U.S. election, some analysts forecast a Bush victory would boost the dollar, as the Republican was perceived to be more supportive of pro-business policies.

ECB Watch

On Friday and Monday, the ECB buying began early in European trading hours, before 2 a.m. New York time. Yesterday, the purchases came just before 10 a.m. New York time. As the New York morning progressed today, expectations grew that the ECB would hold off, traders said.

The view is that ``they're most likely not going to come in,'' said Russ LaScala, manager of spot trading at Citibank. He expects the euro to remain in a narrow range, between 86.10 cents and 86.80 cents for the time being.

ECB monetary authorities bought euros on their own in the past week, and that has helped keep the currency above 85 cents, preventing a return to record lows of 82.30 cents and 88.965 yen, set on Oct. 26.

A level of about 85.70 cents marks the beginning of ``a zone of risk, where it might invite the ECB once again,'' said David Factor, chief dealer at American Express Bank.

U.S. Election

Some analysts estimated the ECB purchased about 2.5 billion to 3 billion euros in the past week. The euro's weakness fuels inflation as imports become more expensive.

While traders may have been emboldened by the ECB's absence from the currency market today, they said the dollar is not likely to rally much against the euro until the U.S. election is fully resolved.

The standoff on the election ``clouds a lot of investors' sentiment'' toward the U.S., and can work against the dollar as it's been souring foreign investors on U.S. stocks, said Jeffrey Yu, a currency strategist at Sanwa Bank Ltd.

A delay in the transition to a new administration could impede progress on issues such as negotiations in the Middle East, analysts said.

Against the yen, the euro fell to 92.92 yen from 93.05 late yesterday. It's down from a high of 93.655 earlier.

Sanwa's Yu said the election standoff is probably leading some investors who had earlier sold the euro short, in a bet the currency would fall, to use dips in the euro's price to buy it back. He also cited talk that some portfolio managers might scale back holdings of U.S. equities as the election outcome dragged on.

The three major U.S. stock indexes fell today.

Japan

On Sept. 22, the European Central Bank and its counterparts from the U.S., Japan, the U.K. and Canada coordinated euro purchases to prop up the currency. That intervention was the first ever on behalf of the euro.

In other trading, the yen slipped to 107.74 per dollar, from 107.44 yen, after Japan said machinery orders fell more than expected in September. Compared with the prior quarter, orders rose for the fifth straight time in the three months through September.

Also today, Japan's Economic Planning Agency in its monthly report downgraded its assessment of the economy for the first time in more than two years, warning that slower growth in Europe and the U.S. might put the brakes on exports.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=AOgw6ZRTbRXVybyBE

-- Martin Thompson (mthom1927@aol.com), November 10, 2000