TOKYO: The euro slid in Asia Thursday as falling prices in the eurozone boosted the prospect of European Central Bank (ECB) stimulus, while the Fed appears on track to hike interest rates by mid-year.
The single currency slipped to $1.1825 and 141.51 yen in Tokyo against $1.1842 and 141.70 yen in New York. The euro dropped to 1.1802 at one point on Wednesday, its lowest since January 2006.
"The inflation data is taking a toll on the euro," Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, told Bloomberg News.
"I can't think of any excuse for the ECB not to act in January."
Speculation of ECB action was spurred by news that eurozone consumer prices fell 0.2 percent in December, marking the first drop since October 2009, at the height of the financial crisis.
The data raise the risk of a spiral of deflation, increasing expectations the ECB will launch a bond-buying programme, known as quantitative easing (QE), to prop up the eurozone's beleaguered economy.
Political turmoil in Greece also weighed on sentiment. The debt-hit country is holding elections later this month that could see a victory for a party opposed to austerity measures required under an international bailout.
The dollar -- which rose to 119.65 yen from 119.17 yen -- won support from data Wednesday that showed the US trade deficit shrank to its lowest level in nearly a year while the private sector added a higher-than-expected 241,000 jobs in December.
"I don't see anything to suggest the US dollar bull market should get bucked," said Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG.
Minutes of the Federal Reserve's December meeting highlighted risks to the US economy from international developments, but policymakers also appeared willing to look past below-target inflation as they consider hiking interest rates.
"The... minutes from the December meeting did little to change investor views for the timing of the first rate rise in 2015," National Australia Bank said.
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