Forex

10:43 03/10 (CEP News) Montreal – European Central Bank President Jean-Claude Trichet stepped up his rhetoric on the foreign exchange market on Monday, sending the euro lower and roiling other forex crosses.

“Excessive volatility and disorderly movements in the exchange rates are undesirable for economic growth,” he said at the G10 meeting on Monday in Basel, Switzerland. Trichet also noted “with extreme attention” that the U.S. believes in a strong dollar.

The comments were similar, but slightly more forceful, than what Trichet said last Thursday following the ECB decision to hold interest rates at 4.00%.

The euro fell 40 pips in the moments following the 8:30 a.m. EDT release of the comments to a session low of 1.5313 but later recovered nearly all its losses. At 10:11 a.m. EDT, the euro was down 0.0001 to 1.5355.

Other currencies also fell against the U.S. dollar, including the pound sterling and Swiss franc. The Canadian dollar was one of the largest movers; the loonie initially fell 20 pips and then continued to fall as commodity and equity values wavered.

“Trichet made everyone think twice about being short the U.S. dollar,” said Peter Wadkins, senior foreign exchange analyst at IFR Markets.

On Friday, just after the U.S. report on nonfarm payrolls showed a 63k decline, the euro hit an all-time high of 1.5455. Later, the U.S. dollar made a swift recovery on several crosses, leading some to say a USD cycle low is near.

Wadkins disagrees, saying the U.S. economy will need to show signs of life or other economies will need to falter before the USD stages a recovery.

“Until we’ve established that the fundamentals in the U.S. are improving I don’t think we can put a floor in,” he said.

The Canadian dollar is down 0.0033 to 1.0061 (0.9935 USD/CAD) after trading as high as 1.0143 overnight. Strategists were surprised on Friday when the Canadian dollar fell nearly half a cent despite a blockbuster employment report showing 43.3k new jobs in February.

“The price action on Friday completely shocked everyone,” said Wadkins.