TOKYO: The euro struggled in Asia on Thursday as expectations grew that the European Central Bank (ECB) will announce a boost to its monetary stimulus measures next week.
Bets that the ECB will go further to boost the 19-nation eurozone economy have pushed down the currency, and rekindled speculation that it may soon hit parity with the dollar for the first time since 2002.
Reports have suggested that the ECB could boost its debt purchases or surprise the market with unconventional measures after its meeting Thursday.
“We expect the ECB will cut the deposit rate by more than the market expects next week,” Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group in Singapore, told Bloomberg News.
“This should keep the euro a sell on rallies into the meeting and allow the euro to test $1.05 if the ECB meets our expectations.”
On Thursday, the euro was flat at $1.0622, while it weakened to 130.18 yen from 130.33 yen Wednesday in New York.
Expectations of more ECB action came as the Federal Reserve appears set to go in the opposite direction and raise interest rates as early as next month.
“The prospect of a historically large divergence between US and eurozone monetary policy looks set to push the single currency below parity against the dollar for the first time since late 2002,” Capital Economics said a commentary.
In other trading, the dollar edged down to 122.56 yen, off 122.70 yen Wednesday in New York, but higher than levels seen in Asia earlier in the day.
The greenback was boosted by slight gains in a series of US economic indicators—including October consumer spending and new-home sales—which support a move by the Fed to hike rates before 2016.
Investors were moving out of safe-haven assets, particularly the yen, as tensions over the Turkish downing of a Russian warplane eased.