Euro weakens in Asia on ECB stimulus speculation


TOKYO: The euro struggled in Asia on Monday on growing expectations that the European Central Bank will pull the trigger on a massive bond-buying scheme to buoy the struggling eurozone economy.

In Tokyo, the single currency slipped to $1.1559 and 135.31 yen, from $1.1566 and 135.87 yen on Friday in New York, where at one point it had dropped below $1.1500 for the first time since November 2003.

The dollar changed hands at 117.05 yen, compared with 117.46 yen in US trading.
Investors have been moving out of the euro ahead of the ECB meeting on Thursday that analysts are forecasting will see the introduction of sovereign bond purchases, known as quantitative easing (QE).

The scheme essentially entails the bank printing euros in order to boost lending and fight off deflation—similar to the scheme recently brought to an end in by the US Federal Reserve. However, with more cash in circulation demand for the single currency weakens.

“Nothing could be clearer than the current economic and policy divide than between the US and Europe,” said National Australia Bank.

“As the Fed ponders rate lift-off and US consumer sentiment hits its highest level for 11 years, the ECB last week has been putting together a QE plan that will get some sort of approval from Germany.”

Eurozone inflation fell into negative territory in December, with consumer prices down 0.2 percent. On a year-over-year basis, inflation was the weakest since September 2009—at 0.8 percent it is well below the ECB’s target of close to 2.0 percent.



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