Kim-Mai Cutler and Ron Harui
Thursday, Oct 2, 2008
The euro fell to its weakest in more than a year against the dollar on speculation European Central Bank President Jean-Claude Trichet will today highlight the risks that the region’s economy is sliding into a recession.
The single currency also dropped to a two-year low versus the yen before today ECB’s rate decision. The U.S. currency rose against 15 of its 16 most-actively traded peers as demand for dollar funding increased amid the seizure in the money markets. The dollar also advanced after the Senate approved a $700 billion bank-rescue bill, bolstering expectations the U.S. will act faster than Europe to address the credit squeeze.
“I find it difficult to see what would come out of the ECB today that could be euro positive,” said Adam Cole, head of global currency strategy in London at RBC Capital Markets. “If they maintain their hawkish stance, markets will focus on the risks to growth. If they concede, it’s likely to be seen as a recognition of how bad things are.”
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The euro fell to $1.3903 per euro at 9:27 a.m. in London, from $1.4009 yesterday in New York. It earlier touched $1.3856, the weakest since Sept. 18, 2007. The euro also fell to 146.46 yen from 148.11 yen, reaching 146.08, the lowest since Aug. 1, 2006. The U.S. currency traded at 105.27 yen from 105.71 yen.
While all 58 economists surveyed by Bloomberg expect the Frankfurt-based ECB to keep the main refinancing rate at 4.25 percent today, traders raised bets on a cut in coming months. The implied yield on the Euribor futures contract expiring in March fell to 4.325 percent, from 4.350 percent yesterday.
This article was posted: Thursday, October 2, 2008 at 3:33 am