Thursday, 12 March 2015 17:55
TOKYO: The euro resumed its slump against the dollar on Thursday as the European Central Bank’s new stimulus and worries over a Greek debt agreement dragged the unit closer towards parity.
In Tokyo, the common currency fell to $ 1.0512, down from $ 1.0548 in New York where it hit $ 1.0510 at one stage — its lowest in 12 years.
The euro also weakened to 127.86 yen from 128.10 yen in US trade, while the dollar rose to 121.63 yen against 121.44 yen.
With the ECB just starting on its unprecedented quantitative easing drive, and the Fed due to lift rates possibly by June, analysts are tipping dollar-euro parity by next year, which last happened in 2002.
“The asset-purchase programme, which is starting now, that’s obviously going to drive the euro lower,” said Fabian Eliasson, head of US corporate foreign-exchange sales at Mizuho Financial Group.
“The dollar is just crushing it across the board.”
In other trading, the dollar jumped to 1,131.55 won from 1,126.40 won on Tuesday, after South Korea’s central bank announced a surprise cut in interest rates to a record low 1.75 percent Thursday in a bid to avert a painful deflationary spiral and kick-start the struggling economy.
The Bank of Korea is the latest country — including China, India and Australia — to lower rates in the face of falling prices and weak economic growth, with the US central bank being a conspicuous exception.
“There’s such a divergence between what’s going on in the rest of the world with central banks cutting rates and the US likely raising them,” Michael Cuggino, president of Pacific Heights Asset Management, told Bloomberg News.
The ECB this week kicked off its fresh stimulus drive, under which it plans to buy 1.14 trillion euros’ worth of bonds over the next 18 months. The programme aims to pump liquidity into the system to ward off deflation and spur growth in the single currency area.
Investors are also nervously watching strained talks between Greece and its European creditors over reforming its bailout obligations.
Copyright AFP (Agence France-Presse), 2015
