- It's the second-biggest loser among major peers this month
- Goldman Sachs sees risk of slide to 95 U.S. cents by March
The euro fell to its weakest level in seven months against the dollar and yen as investors speculated the European Central Bank will expand stimulus when it meets next week.
The euro is this month’s worst-performing major currency versus the greenback after the Danish krone as ECB President Mario Draghi reiterates that officials will do what they must to accelerate inflation that’s undershot their 2 percent target since 2013. The shared currency’s slide underlines the policy divergence between an ECB preparing to ease further and a Federal Reserve that’s set to raise interest rates for the first time in almost a decade.
Investors “should never underestimate Mr. Draghi’s commitment to deliver easier policy,” said Kit Juckes, a London-based global strategist at Societe Generale SA. “‘Whatever it takes’ means exactly that. These conclusions point me toward a weaker euro.”
The euro fell 0.1 percent to $1.0610 as of 5 p.m. in New York, the lowest since April. The single currency slipped 0.3 percent to 130.05 yen. The dollar fell 0.1 percent to 122.57 yen.
U.S. financial markets were shut Thursday for Thanksgiving.
The euro has fallen 3.6 percent versus the dollar this month, just behind the krone, which is pegged to the 19-nation shared currency. The yen has weakened 1.6 percent.
“We will do what we must to raise inflation as quickly as possible,” Draghi said last week. Inflation is “very low,” ECB Vice President Vitor Constancio said in an interview Wednesday.
Futures indicate a 72 percent chance the Fed will boost its main rate at its Dec. 15-16 meeting. That may send the euro even lower following the ECB’s gathering next Thursday, with a risk it will drop to 95 cents by the first quarter of next year, according to Goldman Sachs Group Inc.
“The hurdle is low for a dovish surprise on Dec. 3,” Robin Brooks, Goldman Sachs’s New York-based chief currency strategist, wrote in a Nov. 25 research note. “As risk-taking resumes in January, the divergence trade should pick up steam.”