Bloomberg: Euro Erases Losses After Trichet Says ECB Ready to Start Raising Rates

Nov. 18 (Bloomberg) — The euro erased its losses against
the dollar after European Central Bank President Jean Claude
Trichet said the central bank is ready to raise interest rates,
after holding its key rate at 2 percent since 2003.

“This is exactly what the market was looking for,”

said
Ian Stannard, a currency strategist in London at BNP Paribas SA.
“Trichet’s clearly telling the market the ECB’s ready to move
on rates, and the market will now begin to expect more rate
hikes and support the euro.”

The euro traded little changed at $1.1748 at 9:05 a.m. in
New York, from $1.1750 late yesterday, according to electronic
foreign-exchange system EBS. It rose against the yen to 139.95
Earlier today the euro traded as low as $1.1757 and 139.09 yen.

Trichet’s comments suggest the central bank will move to
boost its benchmark overnight rate at its next policy meeting on
Dec. 1. The ECB last raised the rate in October 2000, and its
current 2 percent rate is a six-decade low.

By contrast, the Federal Reserve has raised its comparable
overnight rate 12 consecutive times since June 2004, from a
four-decade low of 1 percent to the current 4 percent.

Higher rates make a country’s debt securities more
appealing to foreign investors, boosting demand for the local
currency to buy the securities.

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