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No let-up for sinking euro

The euro has fallen to historic lows against the franc. AP Photo / Frank Augstein

The single European currency has hit fresh lows against the Swiss franc, slipping below the SFr1.51 level.

The euro is now at its lowest level against the Franc since its introduction in January, 1999.

Analysts say the imbalance could adversely affect Swiss exports – the majority of which are with European countries. Germany is the country’s biggest market and the strength of the franc against the euro is making Swiss exports prohibitively expensive.

The euro also slipped below 0.85 cents against the dollar in Asian trading and reached a record low against the Japanese yen.

The single European currency is expected to continue its descent after the release on Wednesday of a weaker than expected monthly German business index. The index has now fallen for three consecutive months, prompting fears that Europe’s biggest economy is slowing down.

Analysts say there are now signs of growing unease at the European Central Bank.

Last week the ECB announced it was buying 2.5 billion euros as part of a new
policy of converting interest earned on foreign exchange reserves back into euros. The move failed to provide lasting relief.

Attention is now turning to this weekend’s meeting of G7 finance ministers in the Czech capital, Prague.

Japan hinted on Tuesday that it is ready to join coordinated action to prop up the euro. “Fundamentally, Japan will co-operate to achieve overall foreign exchange stability”, said the country’s finance minister, Kiichi Miyazawa.

However, the United States is less likely to back intervention, even if the euro’s weakness is beginning to bite into corporate earnings there. Political analysts say Washington would be loathe to be seen selling off dollars with an upcoming presidential election.

Traders expect little let-up on the markets, with speculation that the euro will fall as low as 80 cents against the dollar.

By Michael Hollingdale

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR