ECB comes to aid of euro again as traders bet on a Bush victory boosting the dollar

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The Independent Online

The European Central Bank yesterday waded alone into the currency markets for the fourth time in a week to prop up the struggling euro.

The European Central Bank yesterday waded alone into the currency markets for the fourth time in a week to prop up the struggling euro.

The move came as the International Monetary Fund gave strong backing to the ECB's decision in September to lead a co-ordinated intervention by the Group of Seven nations.

Meanwhile, a leading British pro-euro campaign group claimed the strength of sterling against the euro had led to as many as 56,160 UK job losses so far this year.

The ECB announced yesterday afternoon it had bought euros in the currency markets. This follows two interventions last Friday, and another on Monday. The euro had fallen as traders priced in a victory by Republican George W Bush in the US presidential election. The intervention spurred the euro by half a cent to as high as $86.25. But it fell back below $0.86 as the market concentrated on comments by US Treasury Secretary Larry Summers that he supported a strong dollar.

Craig Larimer, international economist at Banc One Capital Markets, said the ECB felt it was obliged to defend the currency. "They're just letting the market know they're still there."

The ECB said in its monthly bulletin, published last night, that it was intervening because of worries a weak euro was driving up import prices. "Exchange rate developments will continue to be monitored closely," it said.

The IMF said there was a large misalignment in the dollar-euro exchange rate. "The September concerted intervention ... helped stabilise the exchange rate by sending a signal that market participants will have to bear in mind in the future," it said.

The euro also gained against the pound, hitting a six-week high at around 60.55p.

Yesterday, Michael Heseltine, the former Conservative deputy Prime Minister, launched a report claiming the euro exchange rate had helped cause tens of thousands of UK redundancies. The report, by Britain in Europe, said 35,100 job losses had been announced this year that were "wholly or partly linked to currency volatility".

According to consultants, Cambridge Econometrics, for every 10 jobs dependent on trade with Europe, another six are indirectly dependent. BiE said this meant as many as 56,160 jobs had been lost this year - almost the same as the entire 61,000 manufacturing jobs axed to date in 2000. "We cannot remain competitive outside the euro for much longer," Mr Heseltine said. "Now is the time for Britain to make a choice. For business the choice is clear."

Business for Sterling, part of the "no" lobby against joining the euro, said that since the launch of the euro 638,000 jobs had been created in the UK. Nick Herbert, chief executive said: "Had we joined the euro at its launch, we would have suffered a job-destroying inflationary boom."

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