Euro Declines to 9-Year Low Amid Draghi QE Talk; Krone Rallies

The euro slipped below $1.18 for the first time since 2005 amid further signs of economic weakness as European Central Bank President Mario Draghi said stimulus measures may include sovereign-bond purchases.

A gauge of the dollar closed at its highest level on record as U.S. jobless claims decreased, adding to signs of an improving labor market. Europe’s common currency weakened for a fifth day, the longest stretch since May, as German factory orders and euro-bloc producer prices fell in November more than economists forecast. Norway’s krone gained versus all of its 16 major peers as oil prices rose. Russia’s ruble also climbed.

“The ECB is fairly unanimous in trying to get the euro lower as its main strategy,” Ken Dickson, an Edinburgh-based director of foreign exchange at Standard Life Investments Ltd., said by phone. “It does appear that quantitative easing is more likely sooner than later,” he said of the bond-buying strategy.

The euro slipped 0.4 percent to $1.1793 at 5 p.m. New York time and reached $1.1754, the weakest level since December 2005. It was little changed at 141.12 yen. The dollar appreciated 0.3 percent to 119.66 yen, extending yesterday’s 0.7 percent advance.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.2 percent to 1,147.54, the highest close in data going back to 2004.

Oil Currencies

The currency of Norway, western Europe’s biggest oil producer, rose as crude increased for a second day. West Texas Intermediate for February delivery traded added 0.6 percent to $48.92 a barrel in New York after jumping 1.5 percent yesterday.

The krone strengthened 1 percent to 7.6265 versus the dollar, adding to a 0.5 percent gain from yesterday, when it rallied from 7.8440, the weakest since Dec. 16. The ruble appreciated 4.7 percent to 60.3010 per dollar after plunging 46 percent in 2014.

The Nigerian naira advanced the most since November 2003 as oil companies and the Central Bank of Nigeria increased sales of foreign exchange. The currency appreciated 4.2 percent to 178.90 per dollar.

The pound touched a more than one-year low after Bank of England policy makers maintained the benchmark interest rate at a record-low 0.5 percent today, in line with the forecast of all 42 economists in a Bloomberg survey.

Sterling fell 0.1 percent to $1.5090 after reaching $1.5035, the lowest level since July 2013.

Long Dollar

The dollar gained after jobless claims decreased by 4,000 to 294,000 in the week ended Jan. 3, the Labor Department said in Washington. The median forecast in a Bloomberg survey called for a decline to 290,000. Separate reports tomorrow will show employers added 240,000 workers and the jobless rate fell to a 6 1/2-year low of 5.7 percent in December.

“Over 2015 and through 2016, we have an investment strategy of being broadly long of U.S. dollars,” Sue Trinh, senior currency strategist at Royal Bank of Canada in Hong Kong, said of bets for the greenback to strengthen in a Bloomberg Television interview. “That will get more legs, especially as the first Federal Reserve rate hike comes onto the radar.” The bank forecasts the dollar to gain to 132 yen in 2015, she said, a level last seen in 2002.

There’s a 58 percent likelihood the U.S. Federal Reserve will raise its target federal funds rate from a zero-to-0.25 percent range to at least 0.5 percent by September, futures data compiled by Bloomberg show.

‘Ease Aggressively’

Europe’s 19-nation currency depreciated against most major peers as Draghi, in a letter to European Parliament lawmaker Luke Flanagan, echoed his remarks made after the Governing Council’s last monetary-policy meeting on Dec. 4. ECB staff are preparing a stimulus package for officials to consider at their next meeting on Jan. 22.

‘You’re in an environment of diverging central banks,’’ Georgette Boele, a currency strategist at ABN Amro Bank NV in Amsterdam, said by phone. “The ECB will be pressured more to do quantitative easing and to ease aggressively.”

The currency dropped earlier as German factory orders slid 2.4 percent after a revised increase of 2.9 percent in October, the Economy Ministry said. Analysts predicted a decline of 0.8 percent. Producer prices in the currency union dropped 0.3 percent from October, according to the European Union’s statistics office, versus a forecast decline of 0.1 percent.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE