SINGAPORE: The euro edged lower against the dollar in Asia on Friday amid mounting speculation the European Central Bank will start buying sovereign bonds, analysts said.
The euro bought $1.2055 in afternoon Singapore trade—near two-year lows—from $1.2097 in New York on Wednesday before the New Year break.
The single currency meanwhile stood at 145.09 yen, up from 144.87 yen.
The dollar was at 120.42 yen compared to 119.76 yen in US trade and 119.66 in Asian trade on Wednesday.
Markets in mainland China, Japan, Taiwan, New Zealand, the Philippines and Thailand were closed Friday for holidays.
In an interview published Friday, ECB President Mario Draghi said the central bank’s governing council was “unanimous” that the bank would intervene to prevent the 19-nation bloc from slipping into deflation.
“We are in technical preparations to adjust the size, speed and compositions of our measures in early 2015, should it become necessary to react to too long a period of low inflation,” Draghi was quoted as saying by German financial newspaper Handelsblatt.
The ECB has already used several tools to push inflation in member nations back up to the 2.0 percent annual rate it regards as healthy, including asset purchases and making cheap loans available to banks.
It is also examining the possibility of large-scale purchases of sovereign debt—so-called quantitative easing (QE)—to help jump-start the European Union’s moribund economy.
If the eurozone fell into deflation, it would create a dangerous downward spiral of falling prices that can strangle economic growth and drain government coffers.
Stephen Pope, managing partner at the London-based Spotlight Ideas, said Draghi will have his work cut out amid concerns by “hardliners” that “QE is a backdoor to sovereign state financing” and “the notion that the ECB will act as buyer” of debt from eurozone nations that have refused economic reforms.
“I fully expect to see explicit measures that will limit credit risk by suggesting that only the highest quality bonds be acquired,” Pope said in a commentary. The decision-making ECB council meets next on January 22.
The US dollar meanwhile remained supported ahead of the release of factory data later Friday, analysts said. The Dollar Index ended 2014 11 percent higher against a basket of rival currencies following a slew of positive economic news.
The greenback was largely higher against Asia-Pacific currencies.
It rose to Sg$1.3277 from Sg$1.3217 in Singapore on Wednesday, to 33.00 Thai baht from 32.89 baht, to 63.31 Indian rupees from 63.30 rupees, and to 12,564.50 Indonesian rupiah from 12,408.60 rupiah.
It strengthened to Tw$31.74 from Tw$31.59, while remaining flat at 44.72 Philippine pesos.
The Australian dollar bought 81.37 US cents against 81.91 cents, while the Chinese yuan bought 19.33 yen from 19.30 yen.