LONDON: The euro hit another nine-year low against the dollar on Wednesday as investors braced for inflation numbers that should give doves at the European Central Bank a clear mandate for bolder policy stimulus.
Data due at 1000 GMT is expected to show the first annual fall in consumer prices since the depth of the global financial crisis in 2009, piling pressure on the ECB to launch a full-scale quantitative easing programme - effectively the printing of euros - at its next policy meeting on Jan 22.
The common currency fell as far as $1.1842, its lowest since March 2006. It was last trading at $1.1865, down 0.2 percent on the day.
"A negative (inflation) print is going to keep up market speculation that the ECB will announce something (on QE) in January," said Ian Stannard, head of European FX strategy at Morgan Stanley in London.
"But given the uncertainties in Greece, that may be a little bit ambitious at this point, at least for them to come out with any detailed plan," Stannard said.
A German newspaper reported on Tuesday that Germany was making contingency plans for the possible departure of Greece from the euro zone, ahead of a Greek election on Jan 25 that could see victory for the Syriza party, which wants to cancel austerity measures and some of the country's debt.
The dollar trimmed some of its losses against the safe-haven yen amid a slight lull in the recent flight-to-quality bids. After slipping to as low as 118.05 yen overnight, the greenback last traded up 0.6 percent at 119.12 yen.
Key for the dollar later in the day will be the U.S. Federal Reserve's December meeting minutes, which should give markets some clues as to the timing of interest rate rises.
"The Fed may not hike rates until June at the earliest. That is too far ahead for participants to make bets on, so meantime market focus rests on the ECB's meeting and the Bank of Japan, which continues to instil fear due to its unpredictability," said Kyosuke Suzuki, head of FX at Societe Generale in Tokyo.
As Brent crude oil fell below $50 a barrel for the first time since May 2009, oil-rich Canada's dollar hit a 5-1/2 year low at C$1.1851 against its U.S. counterpart .
Comments
Comments are closed for this article.