Bank of England used £51m from reserves to bolster the euro

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The Independent Online

The Bank of England used £51m from its foreign currency reserves in last month's surprise effort by the leading industrial countries to prop up the weak euro, official Treasury figures showed yesterday.

The Bank of England used £51m from its foreign currency reserves in last month's surprise effort by the leading industrial countries to prop up the weak euro, official Treasury figures showed yesterday.

Currency experts in the City said this was a minor contribution to the joint intervention led by the European Central Bank, estimated at $5bn to $6bn (£3.4bn to £4.1bn).

Mark Cliffe, chief economist at City bank ING Barings, said: "It was a token effort, but that's because the Bank of England is only a bit-part player." The ECB asked the UK, and the other members of the G7 leading industrial nations, to take part in the operation on 22 September.

The move, a week before the Danish referendum on membership of the single currency, had only limited success in boosting the value of the euro against the dollar and yen.

Michael Portillo, the shadow chancellor, described the decision to join in the action on behalf of the euro as "questionable", saying the history of currency market interventions was not a happy one.

"The euro suffers from a lack of credibility, which cannot be addressed by Gordon Brown's short-termism," he told the Conservative Party Conference in Bournemouth.

The Treasury said the decision to take part was a signal of the concern the UK shared with other G7 members over the euro's under-valuation in the currency markets. The small amount, set by the Government, was in line with the minor role played by the UK in earlier G7 interventions, such as the operation in 1995 to boost the US dollar. The euro gained several cents against the US dollar in the immediate aftermath of the intervention, and has continued to be propped up by the threat that the central banks will step in to the market again.

But the Danish no vote dealt it a fresh blow. Yesterday the euro was trading at just more than 87 cents against the dollar, just a cent higher than it was when the ECB stepped in and three cents above its record low.

Mr Cliffe said the intervention was a success because it stabilised the euro. "I think it would have fallen substantially if they hadn't intervened."

The euros purchased by the Bank of England remain part of the UK's official reserves, worth a net £9.2bn at the end of last month. If or when the euro revives, the Bank could make a profit on its support for the single currency.

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