The EUR finished yesterday's trading session with mixed results versus the major currencies, after the European Central Bank hinted it would slowly start withdrawing emergency liquidity. The 16-nation currency extended gains versus the Japanese Yen during yesterday trading session, to trade above 132.85 amid a broad sell-off in the JPY. The EUR did see bearishness as well as it lost over 50 pips against the USD and closed at 1.5055 levels.
The ECB kept its main interest rate unchanged at 1% a record low, but still higher than the Federal Reserve's or the Bank of England's rates. Higher interest rates can support a currency as investors move funds to where they earn the best returns.
European Central Bank President Jean-Claude Trichet said Thursday the economy of the 16 countries that use the EUR will grow at a moderate pace next year, but the recovery will be "uneven and subject to risks." He confirmed widespread speculation that the ECB will start winding down its extraordinary measures, which include cheap loans to banks that were used to provide the financial system with extra liquidity during the financial crisis.
