Monday, 24 Jan 2011

Forex: Ireland Woes Weighing on EUR

The euro backed off a two-month high against the dollar on Monday after an early burst of buying ran out of steam, while political turmoil in Ireland highlighted uncertainties facing heavily indebted euro zone countries.

Tough talk on inflation pressures from European Central Bank chief Jean-Claude Trichet on Sunday helped to push the euro as high as $1.3648, its strongest since late November, but a lack of follow-through demand knocked the single currency back down.

In an interview with the Wall Street Journal on Sunday, Trichet said core inflation was not a good gauge of future price pressures and that the central bank was ensuring higher energy prices do not seep into other prices.

Investors also focussed on Ireland after Prime Minister Brian Cowan resigned as head of the Fianna Fail party at the weekend, plunging the country into political turmoil as it tries to pass a budget bill to access an EU and IMF bailout.