December 29, 1999


              Euro Dips, Traders Idle As Y2K Looms


              REUTERS INDEX | INTERNATIONAL | BUSINESS | TECHNOLOGY 


              Filed at 10:45 a.m. ET

              By Reuters

              NEW YORK (Reuters) - The euro drifted lower against the dollar and yen in sluggish
              trading on Wednesday as dealers largely spun their wheels ahead of the millennium
              transition weekend. 

              ``We're in Y2K shutdown mode,'' said Rick Gomes, managing director of foreign
              exchange at Republic National Bank of New York. 

              Many traders said they had stopped taking orders, shunning spot trades conducted
              Wednesday that would settle early next week when markets discover how
              time-sensitive computer systems have weathered the transition from 1999 to 2000. 

              With illiquid conditions exaggerating currency moves, the euro slipped to a week low
              against the Japanese yen. Euro/yen weakness dragged the single currency lower
              against the dollar to a session low of $1.0039. 

              The euro retraced some of its losses, but still dangled within sight of its 102.02 lifetime
              low against the yen and just over half a cent from parity with the dollar, the
              psychologically significant level it touched early in December. 

              ``It's just year-end volatility. It happens every year, but it's more pronounced ahead of
              Y2K,'' said a senior trader at a Japanese bank. 

              Weighed by the euro/yen cross, the dollar dipped below 102 yen, a level that has
              recently capped the yen's upside as traders worry the Bank of Japan may intervene to
              curb export-crippling yen strength. 

              Many traders ignored the moves, saying they were more focused on readying their
              trading systems for the century change than on the market. 

              ``We are trying to encourage customers to settle for January 10 and avoid settling the
              first week,'' Gomes said. 

              ``If they want to trade for the 3rd or 4th, we'll do it, but we're trying to minimize the
              number of transactions settling for the 3rd or 4th until we get through the Y2K hump.''
              he said. 

              Dealers said speculative players were sidelined and that activity was limited to
              customers who had no choice but to settle monthly or annual accounts before year's
              end. 

              Overnight, the market was oblivious to attempts by European central bankers to talk up
              the euro, which is approaching the end of its first year some 14 percent weaker against
              the dollar and almost 22 percent softer against the yen. 

              European Central Board member Tommaso Padoa-Schioppa told the French newspaper
              Le Monde on Wednesday the euro's fundamentals were underestimated, while ECB
              member Christian Noyer told the French newspaper Liberation the euro had room to
              rise and said he was personally not happy with its fall. 

              ``All that's been said is just a repeat of what we have seen in the past,'' said Jeremy
              Hawkins, chief economic adviser at Bank of America in London. 

              Separately, Bundesbank council member Franz-Christoph Zeitler said in a statement
              that government plans to scrap a tax on sales of Germany's web of domestic cross
              shareholdings could help boost the euro. 

              Doubts the plans would ever be implemented kept the euro a full cent below highs
              reached last Thursday, analysts said. 

              The yen, meanwhile was unfazed by a staggering 14.6 trillion yen surplus the Bank of
              Japan left in the Japanese money market -- following a massive 9.1 trillion surplus a
              day earlier -- to counter any Y2K-disruptions.