ON (AFP) - The euro crept upwards against the dollar and the yen on Thursday as the European Central
Bank held its record low interest rates and gave a cautiously upbeat economic outlook.
There are increasing signs of stability in economic activity in the euro area and elsewhere, ECB president
Jean-Claude Trichet told reporters after the bank held its key interest rate at the historic low level of 1.0pc. This
is consistent with the expectation that the significant contraction in economic activity has come to an end and is
now followed by a period of stabilisation and very gradual recovery.
He urged caution and warned the road to recovery could be bumpy.
Analysts saw the rate decision as a source of support for the euro.
Commerzbank analysts wrote that in light of an upbeat outlook from the ECB, the risk of positive surprises
prevails, which should benefit the euro. In late London trading, the European single currency was up to 1.4270
dollars from 1.4267 dollars in New York late on Wednesday.
The dollar meanwhile briefly fell below the 92-yen level for the first time since mid-July as worries about a weak
US job market prompted buying of safe-haven assets, dealers said, but it recovered later.
Against the Japanese unit, the dollar climbed in late London trading on Thursday to 92.58 yen from 92.17 yen
late on Wednesday.
Ahead of the ECB rate decision, a closely-watched survey, the revised purchasing managers index (PMI),
showed the eurozone economy expanded in August for the first time after 15 months of business contraction.
The PMI index suggests that the eurozone may well come out of recession in the third quarter, said economist
Rob Dobson of Markit in a statement. Easing fears of deflation and signs the 16-nation economy could soon pull
out of recession give the ECB time to assess the effects of successive rate cuts and massive funding
operations taken to encourage bank lending.
Trichets comments suggested that the bank is likely to keep interest rates at 1.0 percent deep into 2010, IHS
Global Insights chief European economist Howard Archer said.
Investors were cautious meanwhile after the payrolls firm ADP reported that the US private sector shed 298,000
jobs in August worse than market expectations for 250,000 job losses.
Recent economic data was certainly not dollar-friendly. The pace of job losses is moderating only slowly, NAB
Capital strategist John Kyriakopoulos wrote in a note.
Friday sees the release of a keenly-watched US jobs indicator, the non-farm payrolls data, seen as one of the
best indicators of economic momentum.
Investors are hoping that tomorrows Non-Farms will help to cement the recovery theory. At present, there
seems to be a lot of hesitation out there as to what figure we could expect, said analyst Nick Serff at City Index.
Market players were also awaiting a meeting of finance ministers from 20 major economies in London starting
Friday for clues to whether policymakers are preparing to scale back emergency measures to shore up their
In late London trading on Thursday, the euro was changing hands at 1.4270 dollars against 1.4267 dollars late
on Wednesday, at 132.01 yen (131.54), 0.8723 pounds (0.8765) and 1.5136 Swiss francs (1.5127).
The dollar stood at 92.58 yen (92.17) and 1.0614 Swiss francs (1.0599). The pound was at 1.6347 dollars
On the London Bullion Market, the price of gold jumped to 983 dollars an ounce from 964.75 dollars an ounce
late on Wednesday.