Photographer: Simon Dawson/Bloomberg

World’s Fourth-Biggest Currency Trader Sees Euro Decline Ahead

  • Currency drops to lowest in almost three months against dollar
  • Traders await ECB meeting for signals on policy direction

Deutsche Bank AG is sticking with its weaker euro call.

The currency dropped to the lowest in almost three months and the world’s fourth-largest foreign-exchange trader says it’s got further to fall. The bank sees the shared currency declining to $1.05 by year-end, more bearish than the $1.10 median estimate of analysts surveyed by Bloomberg. Traders will be watching the European Central Bank’s policy-setting meeting Thursday for signals about its monetary stimulus efforts, which haven’t prevented the euro from climbing this year.

“We’re at $1.05, which in the scheme of such a narrow range feels aggressive,” Alan Ruskin, global co-head of foreign-exchange research in New York at Deutsche Bank, said on Bloomberg Television. “But really it could be a two-day trading range if the Italian referendum voted ‘no’ for example, and the Fed soon thereafter hiked rates -- you’d get to $1.05 fairly easily.” He was referring to a vote on constitutional changes in Italy and Federal Reserve monetary policy.

The euro has been stubbornly strong versus the dollar this year as traders speculated that the ECB was reaching the limits of its stimulus efforts. That diminished monetary-policy divergence with the Fed, which held off on raising interest rates and caused the dollar’s rally to fizzle against its biggest peers.

The shared currency was 0.1 percent lower at $1.0974 as of 5 p.m. in New York and fell 0.5 percent to 113.51 yen. The euro strengthened last month on speculation that the ECB will consider when to taper monthly bond purchases.

Euro weakness may gather momentum into year-end, wrote analysts at Toronto-Dominion Bank, including Ned Rumpeltin, the European head of currency strategy in London. But in the short term, there’s a risk that the currency “could surge higher if ECB tapering becomes more of a tangible threat.”

The ECB won’t start to phase out asset purchases before the second half of 2017, according to a Bloomberg poll of 50 economists conducted Oct. 7-14.

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