Filomena Scalise

New York - Market talk of central bank co-ordination to stabilise markets if Greece's weekend election leads to its euro exit boosted the single currency in late trade on Thursday, even as rating agencies continued their onslaught of euro-area downgrades.

Rumours about the US Federal Reserve planning joint efforts with the big European central banks and others to stabilise markets after Sunday's Greek vote fed forex and equity market movements late in the day.

At 21h00 GMT, the euro was at $1.2630, compared to $1.2556 late on Thursday, as traders ignored Moody's downgrades of Spain and Cyprus and Egan-Jones' cut of France's sovereign rating.

The euro gained “amid speculation that the G20 countries will co-ordinate collective action if Greece leaves the eurozone, pending the outcome of the June 17 Greek election”, said analyst Tzu-Wen Chen at DailyFX.

Also hurting the dollar was new speculation that the Fed could take more stimulus action in its policy meeting next week, further pressing down interest rates, after a handful of new indicators indicated more weakness in the US economy.

Meanwhile, the British pound got a late bounce on the central bank's announcement it would pump cheap funding into banks to boost lending and growth, and an earlier government move to split retail and investment banking.

The pound rose to $1.5556 from $1.5508.

The euro also picked up against the Japanese currency, to 100.21 yen from 99.78.

The dollar though fell, buying 79.34 yen, down from 79.46 on Wednesday.

Against the Swiss franc, the dollar dropped to 0.9507 francs from 0.9564 francs. - Sapa-AFP