To curve the volatility, the European Central Bank has decided to monitor the conditions on the euro market as U.S. subprime mortgage losses continued to shake credit markets.
Earlier, ECB has pumped 94.8 billion euros ($130.2 billion) in cash into the eurozone banking market to allay fears about a sub-prime credit crunch. Bank’s intervention pumped euro’s rate to 4.19%, against ECB’s benchmark refinancing rate of 4%.
The ECB made the money available in the form of loans, an offer taken up by 49 banks and other financial institutions.
Bank intervene in the market after French bank BNP Paribas suspended three investment funds worth 2bn euros ($2.73bn), due to worries in the US sub-prime mortgage sector. Other banks have also suspended funds with sub-prime investments. US lenders are suffering from the sharp rise in defaults on higher-risk mortgages and due to it; fear is looming high that the financial repercussions of this slump can crunch the European too.
Some market experts oppose the bank’s strategy to restore the liquidity in the market, whereas the larger section support ECB’s plan. The ECB, itself described the move as a “fine-tuning operation” for the banking market, which is the bank’s single largest intervention in the banking sector since 9/11 attacks on the US in 2001.
Investors are not trading at the moment as they’re just hoping ECB’s intervene again.
Via: Reuters
