Euro slides again on potential ECB stimulus boost

The euro skidded lower for a second day Friday after the European Central Bank said it could weigh boosting its economic stimulus efforts in December.

ECB chief Mario Draghi's hints Thursday of possible loosening of the monetary reins, with the tools of an expansion of the 1.1 trillion euro bond-purchase program and an interest rate cut possibly on the table, raised the prospect of more euros flooding the market.

A day after falling more than two cents against the dollar, the euro lost nearly another cent, trading at $1.1016 around 2100 GMT, down from $1.1111 at the same time Thursday.

The shared currency briefly dropped below $1.10 in Friday trade, for the first time since early August.

The ECB signal was followed Friday by China's interest rate cut, the sixth in a year, to counter the slowdown in the world's second-biggest economy.

Both moves came ahead of the Federal Reserve monetary policy meeting on Tuesday and Wednesday, with the US central bank weighing whether to raise near-zero interest rates. Most analysts expect the Fed will wait at least until the December meeting for liftoff.

"While it can be argued that stimulus abroad is good for US markets and makes it easier for the Fed to raise interest rates in December, the reasons why these central banks are easing and the consequence it has for the dollar could also deter them from tightening," said Kathy Lien of BK Asset Management.

 

2100 GMT  Friday    Thursday

EUR/USD    1.1016   1.1111

EUR/JPY      133.80   134.10

EUR/CHF     1.0782   1.0811

EUR/GBP     0.7193   0.7218

USD/JPY      121.46   120.69

USD/CHF     0.9787   0.9729

GBP/USD     1.5313   1.5394

AFP