Euro Rallies After ECB Tender
LONDON—The euro rallied Wednesday as lower-than-expected demand for a European Central Bank tender eased fears over euro-zone bank funding.The European Central Bank said Wednesday that it allotted €131.933 billion ($160.92 billion) in funds at a 91-day refinancing tender, at a fixed rate of 1%. It said 171 banks bid at the tender, which it conducted under a "fixed-rate, full allotment" procedure, essentially allowing banks to borrow as much as they wanted.
The volume was significantly less than many market participants had expected, with forecasts of up to €250 billion circulating ahead of the tender.
The low take-up sent the euro more than a cent above the day's high to trade at $1.2275.
Still, concerns about global growth continue to dominate sentiment after the U.S. Conference Board reported that its consumer confidence index had fallen even more than expected in June. More bad news could come with the Chicago purchasing managers' index later Wednesday, which is forecast to show a decline to 58.5 from 59.7.
The deteriorating outlook for the U.S. economy has coincided with worries that Chinese growth may be slowing sharply, even though inflation pressures aren't subsiding.
If price pressures remain high at the same time, Beijing may need to tighten monetary policy even more, undermining the country's growth prospects further.
Elsewhere, the dollar rose to ¥88.64 from ¥88.54 and to 1.0830 Swiss francs from 1.0808 francs.
The pound fell to $1.5003 from $1.5074 as one member of the Bank of England's monetary policy committee denied claims by another member earlier this week that the U.K. needs to raise interest rates anytime in the near future.
Source: Dowjones.com
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