Thursday, October 2, 2008
Oct. 2 (Bloomberg) — The euro fell to a 13-month low against the dollar and the weakest in two years versus the yen after European Central Bank President Jean-Claude Trichet said policy makers discussed cutting interest rates as economic growth slows.
The European single currency dropped for the fourth day against the dollar as Trichet said recent data suggests “increased downside risks” to growth. The ECB kept its main rate at 4.25 percent today, a seven-year high. The decision was predicted by all 58 economists surveyed by Bloomberg.
“The euro is under pressure across the board,” said Marcus Hettinger, a Zurich-based currency strategist for Credit Suisse Group. “The next move in rates will be down. It’s more a question of time.”
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The euro declined to $1.3828 at 3:23 p.m. in London, from $1.4009 yesterday in New York. It touched $1.3748, the weakest level since Sept. 7, 2007. The euro fell to 145.52 yen, from 148.11 yen, reaching 145.19, the lowest level since July 11, 2006. The U.S. currency traded at 105.25 yen, from 105.71 yen.
Declines in the euro reduce the likelihood of coordinated action by central banks to support the dollar, which has dropped more than 17 percent against the 15-nation currency in the past five years.
It may also help European exporters such as Fiat SpA, Volkswagen AG and Airbus SAS just as the region heads toward a recession. French Finance Minister Christine Lagarde said Sept. 11 she welcomed the euro’s decline to below $1.40. Belgium’s Didier Reynders said a weaker euro reflected “fundamentals.”
The euro has slid 5.6 percent this week, the biggest four-day drop since the currency’s debut in 1999.
Traders raised bets on a rate cut in coming months. The implied yield on the Euribor futures contract expiring in March was at 4.16 percent today, from 4.77 percent a month ago.
This article was posted: Thursday, October 2, 2008 at 9:56 am