by Ralph Atkin in Frankfurt Dec-3-2009 The European Central bank's emerging financial market support measures are set to be unword from this month after Jean Claude Trichet,Ecb president rebuffed IMF calls to err on the side of delaying 'exit strategies'.
The Ecb moved on thursday to limit demand for one year liquidity in an operation that will take place later this month and told eurozone bank that other,short term liquidity- boosting operation would be scale back in 2010.The ECb took account of the continuing weakness of some euro zone banks.
Measures, however were bolder than financial markets expected,highlighting Ecb fear that some banks have become overdependent on the liquidity.
Currently some 670bn euro in Ecb liquidity is outstanding compared with typical pre- crisis level of about 450bn euro. The Ecb's financial package action are intended to store up the eurozone financial system after the collapse of Lehman brothers last year.
Euro boosted by ECB liquidity The ECB left euro interest rate on hold at a record low of 1% after policy meeting. John Hardy at Saxo bank said "this was a clear signal in the Ecb's exit strategy from its emerging liquidity provisions for this cycle- a far clearer signal than any that the Federal reserve bank of England had come up with". He said "If equities remain supportive, we should see new hights for the euro against the dollar. The euro rose to 0.3%to 1.5089 against the dollar striking distance of 16 month high of $1.5144 it hit last week. The euro also rose to 0.7% to pound 0.9108 against the pound and climbed 1.3% to Y133.10 against the yen.
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