The euro hit a nearly nine-year low versus the US dollar yesterday as investors bet on quantitative easing by the European Central Bank (ECB), while soft manufacturing surveys pushed down shares and sent oil prices to five-and-a-half-year lows.
The euro fell to as low as US$1.18605, its weakest level since March 2006, having fallen below an important support at US$1.20. The common currency last traded at US$1.1926, down 0.6 percent from late US trade on Friday last week.
In an interview with German financial daily Handelsblatt published on Friday, ECB President Mario Draghi said the risk of the central bank not fulfilling its mandate of preserving price stability was higher now than half a year ago.
Photo: Bloomberg
“The market took his comments to mean that he is ready to adopt quantitative easing,” said Shin Kadota, chief forex strategist at Barclays in Tokyo.
Economists forecast that tomorrow’s eurozone inflation data will show that prices fell 0.1 percent last month, the first decline since 2009.
That should fan expectations the ECB could ease its policy as soon as Jan. 22, when it holds its first policy meeting this year.
Also underscoring the pressure on central banks to implement more stimulus, business surveys last week showed factories struggled to maintain growth across Europe and Asia.
Even in the US, which is seen as one bright spot in the global economy, the pace of manufacturing growth last month slowed more than expected.
That sapped investor appetite for stocks, with Wall Street shares ending mostly flat on Friday, the first day of trading this year, after stellar gains of 11.4 percent in the S&P 500 index last year.
S&P futures dipped 0.1 percent in early Asian trade yesterday, while MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent.
Chinese shares, however, maintained their bullish tone since last year on hopes of more stimulus, as property shares jumped on local media reports saying mortgage restrictions had been loosened.
The CSI 300 index, hitting a five-year high, added more than 3 percent on this year’s first day of trading. It rallied 52 percent last year.
Oil prices, whose decline of more than 50 percent from peaks in June last year rattled many energy producers, hit a five-and-a-half-year low as global growth concerns fanned fears of a supply glut.
Brent crude futures dropped as low as US$55.36 a barrel, also its lowest since May 2009, before edging back to US$55.42, still down a dollar.
“Oil demand is unlikely to be robust this year when we look at the state of economies in China, Japan and Europe,” Newedge Japan commodity sales manager Yusuke Seta said.
That did not help commodity currencies such as the Canadian dollar, which fell to C$1.1843 to the US currency, its lowest level since mid-2009.
The Australian dollar likewise dropped to a five-and-a-half-year low of A$0.8036.
The US dollar also surged against the Swiss franc and sterling, extending a recent bull run as markets wagered a relatively healthy US economy will lead the US Federal Reserve to raise rates in the middle of this year.
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