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Euro drops on IMF chief's comment
By Anchalee Worrachate |
January 13, 2009, Tuesday
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Print Edition
Print Edition
THE euro yesterday fell for a second day against the United States dollar as the International Monetary Fund's Managing Director Dominique Strauss-Kahn said Europe is "underestimating the needs" of fiscal stimulus for the economy.
The currency also dropped to a one-month low versus the yen as traders increased bets that the European Central Bank will cut its main interest rate to the lowest level since 2005 this week to help pull the 16-nation economy out of a recession. The yen rose against all 16 major currencies tracked by Bloomberg News as falling Asian and European stocks damped demand for carry trades.
"The way to play it in the near term is to short the euro going into the announcement because the likelihood is that the ECB is going to cut,"said Daragh Maher, deputy head of global currency strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. "My preference is short the euro against the yen. Economic reports throughout the week are likely to add to the environment of high risk aversion."
The euro dropped to US$1.3342 as of 8:43am in London, from US$1.3476 in New York on January 9. The currency declined to 120.28 yen from 121.81 and traded as low as 120.11, the weakest since December 12. Against the British pound, the euro rose to 89.16 pence from 88.78 pence. The yen strengthened to 90.13 per dollar, from 90.39 last week.
The yen strengthened to 62.52 against Australia's dollar from 63.59 and strengthened to 52.79 versus New Zealand's dollar from 53.49 as investors trimmed holdings of higher-yielding assets funded in Japan.
The euro may weaken to US$1.30 to the dollar and 117 yen by the end of the first quarter, according to Calyon.
The currency also dropped to a one-month low versus the yen as traders increased bets that the European Central Bank will cut its main interest rate to the lowest level since 2005 this week to help pull the 16-nation economy out of a recession. The yen rose against all 16 major currencies tracked by Bloomberg News as falling Asian and European stocks damped demand for carry trades.
"The way to play it in the near term is to short the euro going into the announcement because the likelihood is that the ECB is going to cut,"said Daragh Maher, deputy head of global currency strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. "My preference is short the euro against the yen. Economic reports throughout the week are likely to add to the environment of high risk aversion."
The euro dropped to US$1.3342 as of 8:43am in London, from US$1.3476 in New York on January 9. The currency declined to 120.28 yen from 121.81 and traded as low as 120.11, the weakest since December 12. Against the British pound, the euro rose to 89.16 pence from 88.78 pence. The yen strengthened to 90.13 per dollar, from 90.39 last week.
The yen strengthened to 62.52 against Australia's dollar from 63.59 and strengthened to 52.79 versus New Zealand's dollar from 53.49 as investors trimmed holdings of higher-yielding assets funded in Japan.
The euro may weaken to US$1.30 to the dollar and 117 yen by the end of the first quarter, according to Calyon.
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