It seems the dog days of summer have set it. Capital markets are trading sideways, amid a veritable absence of new developments. It is in this climate that the release of European portfolio data is enough to light a spark in currency markets. According to reports, foreigners poured $140 Billion into European capital markets, in June alone. Many traders are confident that these portfolio inflows and the recent strong performance of European equities will provide a floor for the Euro currency. Others are counting on Asian Central Banks to prop up the Euro, by continuing to diversify their vast foreign exchange holdings.

With the eurozone equity market continuing to perform strongly and suggestions that July’s Chinese revaluation may precipitate further reserve diversification into the euro, “global capital flows should be supportive of the euro through the second half of 2005.”

Read More: Euro rallies as portfolio flows jump