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Euro drops on 'a lot more weakness'
By Ron Harui |
January 3, 2009, Saturday
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Print Edition
Print Edition
THE euro fell the most in two weeks against the United States dollar and dropped versus the yen before a European manufacturing report yesterday that will likely show a recession is deepening in the 16-nation region.
The euro, which on Thursday became the currency of Slovakia, headed for its first weekly decline in more than a month on prospects the European Central Bank will cut its key interest rate from 2.5 percent to spur spending. The currency also weakened as a chart traders use to predict price moves signaled December's 10 percent rally against the dollar was too rapid.
"There's a lot more weakness in Europe ahead," said Sean Callow, a senior currency strategist at Westpac Banking Corp in Sydney. "We've got them cutting to 1 percent by March."
The euro fell 0.9 percent, the most since December 19, to US$1.3917 as of 8:18am in London yesterday from US$1.4045 late Thursday in New York and US$1.4028 at the end of last week. It dropped 4.2 percent in 2008.
The currency fell to 127.02 yen from 127.41 yen, after sliding 22 percent in 2008. The dollar rose to 91.22 yen from 90.74 yen, following a 19-percent drop last year. The common European currency may weaken to US$1.20 in the first half of this year, Callow said.
The US currency rose 0.7 percent to US$1.4569 against the British pound and gained 1.3 percent to 1.0754 Swiss francs.
The South Korean won fell 4.7 percent to 1,321 per dollar on speculation the authorities are scaling back intervention to strengthen the currency after companies and banks closed their books for 2008. The currency's 15-percent advance in December, the biggest monthly gain in a decade, trimmed last year's losses to 26 percent.
Europe's manufacturing index was 34.5 in December, unchanged from a preliminary estimate and the lowest since the data was introduced in 1998, according to economists surveyed by Bloomberg News. The index is based on a survey of purchasing managers by Market Economics and a figure below 50 indicates contraction.
The ECB will lower its key interest rate to 1.5 percent by the second quarter of this year, a separate Bloomberg News survey showed.
The central bank cut the rate by 1.75 percentage points since October, the first reduction since June 2003, after a global credit crisis helped trigger the euro region's first recession in 15 years.
The euro, which on Thursday became the currency of Slovakia, headed for its first weekly decline in more than a month on prospects the European Central Bank will cut its key interest rate from 2.5 percent to spur spending. The currency also weakened as a chart traders use to predict price moves signaled December's 10 percent rally against the dollar was too rapid.
"There's a lot more weakness in Europe ahead," said Sean Callow, a senior currency strategist at Westpac Banking Corp in Sydney. "We've got them cutting to 1 percent by March."
The euro fell 0.9 percent, the most since December 19, to US$1.3917 as of 8:18am in London yesterday from US$1.4045 late Thursday in New York and US$1.4028 at the end of last week. It dropped 4.2 percent in 2008.
The currency fell to 127.02 yen from 127.41 yen, after sliding 22 percent in 2008. The dollar rose to 91.22 yen from 90.74 yen, following a 19-percent drop last year. The common European currency may weaken to US$1.20 in the first half of this year, Callow said.
The US currency rose 0.7 percent to US$1.4569 against the British pound and gained 1.3 percent to 1.0754 Swiss francs.
The South Korean won fell 4.7 percent to 1,321 per dollar on speculation the authorities are scaling back intervention to strengthen the currency after companies and banks closed their books for 2008. The currency's 15-percent advance in December, the biggest monthly gain in a decade, trimmed last year's losses to 26 percent.
Europe's manufacturing index was 34.5 in December, unchanged from a preliminary estimate and the lowest since the data was introduced in 1998, according to economists surveyed by Bloomberg News. The index is based on a survey of purchasing managers by Market Economics and a figure below 50 indicates contraction.
The ECB will lower its key interest rate to 1.5 percent by the second quarter of this year, a separate Bloomberg News survey showed.
The central bank cut the rate by 1.75 percentage points since October, the first reduction since June 2003, after a global credit crisis helped trigger the euro region's first recession in 15 years.
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