Euro On Firm Ground

The euro was at a standstill on Wednesday as the momentum from its recent recovery rally waned, but dealers said a strong warning from the German central bank that the euro was undervalued was lending some support.

The Bundesbank launched a broadside defence of the single European currency in its monthly report, saying that the market was undervaluing the euro by 20 to 30 per cent and that "such misvaluations are not good."

Although virtually no one expected the European Central Bank to raise interest rates at its policy meeting on Thursday or to intervene imminently on the currency market, the Bundesbank remarks reinforced the idea that the European authorities were becoming more concerned about the euro's weakness.