Euro Weakens for Second Day on Bets More ECB Stimulus Possible

  • Common currency slid against 15 of 16 major peers on Wednesday
  • Aussie strengthens after China factory gauge stabilizes

The euro fell for a second day as a drop in the region’s inflation rate added to speculation that the European Central Bank will expand monetary stimulus as the Federal Reserve prepares to raise interest rates this year.

The single currency weakened for the first time in three days on Wednesday as consumer prices in the euro area fell 0.1 percent in September from a year earlier, turning negative for the first time in six months. The Australian and New Zealand dollars rose after a gauge of Chinese manufacturing improved in September.

“When risk sentiment improves, the euro falls and the Australian dollar rises, it’s a classic case of risk-based pattern,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. “Right now, it’s developed nation currencies versus emerging and commodities linked currencies which take their cues from stocks that either fuel or ease risk aversion sentiment.”

The euro slipped 0.1 percent to $1.1164 as of 10:34 a.m. in Tokyo, after falling 0.6 percent on Wednesday. It advanced 0.3 percent in the third quarter, following a 3.9 percent climb in the second.

The euro was the best performer after the yen over the past three months among 10 developed-nation currencies, as signs of a slowdown in China set off a rout in equities worldwide.

Too Soon

ECB President Mario Draghi said on Sept. 23 that it was too soon to say whether risks to the economic outlook warranted a step-up in stimulus. The central bank, which started its 1.1 trillion-euro ($1.23 trillion) asset-purchase plan in March, has an inflation goal of just below 2 percent.

The Aussie rose 0.2 percent to 70.31 U.S. cents, while the kiwi added 0.1 percent to 64.02 U.S. cents. The yen was little changed at 119.87 per dollar.

China’s official purchasing managers index climbed to 49.8 in September, the National Bureau of Statistics said Thursday, compared with the median estimate in a Bloomberg survey for it to remain at the three-year low of 49.7 reached in August. Readings below 50 indicate contraction.

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