Newspaper article THE JOURNAL RECORD

Relative Calm Finally Prevails in Europe's Currency Markets

Newspaper article THE JOURNAL RECORD

Relative Calm Finally Prevails in Europe's Currency Markets

Article excerpt

LONDON (AP) _ Relative calm prevailed on Europe's currency markets Thursday, but it was unclear whether the chaos of the past two weeks was easing or whether investors had settled into a stalemate that might still shatter.

The central banks of France and Germany managed for a second day to keep the French franc within European exchange rate guidelines.

Banks, businesses and investors who trade currencies have tried to push the value of the franc lower against the German mark. But their efforts met with stiff resistance from the central banks, which bought enough francs to keep the currency trading at levels required by the European Rate Mechanism.

The ERM, the system designed by the 12 European Community nations to maintain stability in exchange rates, has appeared on the verge of collapse recently as the mark surged and other currencies skidded lower.

Traders said Thursday they believed the Bank of France was close to running out of money to support the franc. But they were cautious about trying to bid the franc lower, fearing that the wellnanced Bundesbank would put up a strong defense of the French currency.

European markets continue to totter after Britain removed the falling pound and Italy withdrew the lira from the ERM last week.

The lingering uncertainty raised further questions about Europe's plans to create a single market without economic borders. The ERM has been viewed as a precursor to a common European currency, one of the goals of the campaign for Europan unity.

Hopes for unity have been steadily eroding amid the currency crisis began. A lukewarm "yes" vote by French voters Sunday on the Maastricht treaty, the blueprint for European unification, has created further doubt about Europe's future.

While France and Germany, who are close partners in the drive for unity, stood together in support of the franc, traders questioned how strong Germany's commitment to rescuing the franc would be if investors the selling keeps up. …

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