Two rumours — a French rating downgrade and President Sarkozy threatening to pull the country out of the euro — have helped weaken the currency to levels seen in October 2008. Deflation in Spain has added to the bears’ case, and better-than-expected industrial production in the US has also helped to strengthen the dollar. The euro has recovered against the dollar in a very volatile day, and is now trading at about 0.8048 euros per dollar.

The ECB paid euros to receive dollars from the Fed, promising to reverse those transactions in eight days’ time. It is the first usage of the revived, crisis-era, swap facility from the Fed. The idea is to help European banks to access dollar funding more easily through the ECB.

The Bank of England, Bank of Japan, Bank of Canada and Swiss National Bank did not use the facility this week. Read more

It’s certainly one way to raise money: Albania’s central bank is to buy a hotel from the government for €30m. The Council of Ministers will retail first refusal on the Hotel Dajti in Tirana, should the central bank sell it on.

Reuters says the government also hopes to issue a €300m – €400m eurobond by the end of next week. The IMF has told Albania it needs to cut its deficit from 7 to 3 per cent this year — a feat very few European economies could achieve. Read more

Ralph Atkins

Jean-Claude Trichet claims the European Central Bank foresaw the financial market crisis that erupted in August 2007. In January that year he warned markets to prepare for a significant “re-pricing” of some assets.

He could also argue that Greece’s downfall could have been predicted by anyone listening to the ECB. Read more

The European Commission has given the green light to Estonia’s euro accession on January , 2011. Final approval is required from EU finance ministers. The timing is ironic given the current eurozone crisis—apparently not one eurozone member would currently meet the strict conditions for entry to the single currency.

From Reuters: Read more

Anti-contagion measures being discussed right now by EU finance ministers might be just a smokescreen for unprecedented action by the ECB. So says Erik Nielsen, chief European economist at Goldman Sachs.

Markets reacted negatively to the Greek bail-out, with equities falling, the euro falling and a rising cost of risk. In other words, markets began to price in a greater chance of contagion. EU finance ministers meeting today want to agree anti-contagion measures before markets open tomorrow. A statement issued Friday said all institutions of the euro area agreed “to use the full range of means available to ensure the stability of the euro area”. Read more

Strong inflation data for April seems to have reassured the Swiss central bank into allowing the franc to strengthen to a new all-time high against the euro.

The franc has been strengthening all year, with the Swiss central bank often rumoured to have intervened, selling francs. Central bank governor, Philip Hildebrand, has previously stated a policy of intervention to counter “excessive appreciation”, but the bank never confirms individual cases. More on

From Bloomberg:

Latvia’s government decided on Tuesday formally to adopt 2014 as its target year for euro zone entry. Latvia has already said it wants to adopt the euro in 2014 and the date is part of its €7.5bn bailout programme with the International Monetary Fund and European Union.

 Read more

Europe’s cost of debt will rise substantially if Indonesia’s concern at holding euros as a reserve currency catches on. The US, Japan and the Middle East might benefit.

Indonesia has cancelled its first sale of euro debt, put off by Europe’s deficit-financing troubles, a finance ministry official told Bloomberg. “The euro bond is definitely not on our mind,” said Rahmat Waluyanto, director general of the debt management office at the finance ministry. “It’s out of our thoughts for the time being because of Greece, Spain, Italy and Portugal. The four countries are having problems and that is causing negative sentiment in the euro market.”

The euro is the world’s second most widely held reserve currency. Indonesia had planned to sell bonds in euros to diversify from a weakening US dollar. The government has now issued $2bn and is also looking at samurai and Islamic bonds for the rest of the year. Read more

By Peter Garnham

Traders and hedge funds have bet nearly $8bn against the euro, amassing the biggest short position in the single currency since its launch on fears of a eurozone debt crisis. Read more

Hungarians will be borrowing more forints and less euros under one of several new initiatives planned by the country’s central bank.

Interest rates are typically higher on forint-denominated mortgages than, for instance, their euro counterparts. But spreads have been narrowing and the central bank plans to reduce them further. The Magyar Nemzeti Bank will buy forint-denominated mortgage notes up to a maximum face value of 100bn forint ($500m). Read more

Ralph Atkins

Speaking in Cambridge, UK, on Thursday evening, Jean-Claude Trichet, ECB president, noted that whereas in the past financial crisis built-up over years, they now spread around the world “in the course of half days”.

For Greece – facing a crisis over its perilous public finances - it has certainly been a roller-coaster week. The financial market reaction to its credit downgrade by Fitch has forced an about-turn (of sorts) by the government in Athens, which now plans on Monday to say how it will reduce the deficit from 12.7 per cent to 3 per cent of GDP in coming years. Read more

Eastern Europe is looking for ways to reduce dependence on loans denominated in foreign currencies, particularly the euro and Swiss franc.

Officials at the EBRD meeting in London this weekend agreed to find ways to develop local currency markets in order to reduce dependence on foreign currency credits. Officials are not looking to regulate but to encourage voluntary moves by banks to tighten rules on foreign currency loans. Officials plan to meet again early next year, preparing concrete proposals by spring. Read more

Oil trades may be denominated in a basket of currencies, rather than the US dollar. Brazil is having a good week, and there are growing calls for IMF reform to go further than that agreed at the G20 Pittsburgh meeting Read more

Ralph Atkins

Trichet is widening his vocabulary on the euro, writes Ralph Atkins of the Financial Times Read more