Thursday February 7, 2008 - 22:34:22 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro slides on growth fears, rate cut expectations
(Recasts, adds comment, updates prices)
NEW YORK, Feb 7 (Reuters) - The euro dropped against the
dollar on Thursday after European Central Bank President
Jean-Claude Trichet said euro zone growth risks are to the
downside, paving the way for lower interest rates this year.
The euro is now on track for its biggest weekly decline
against the dollar in two-and-a-half years. It was pressured
from early in the session as the ECB left benchmark borrowing
costs unchanged at 4 percent and Trichet, at a post-meeting
press conference, also dropped his threat to act pre-emptively
against rising prices.
The euro has come under pressure in the past couple of
sessions amid growing signs the economy in the 15-member bloc
is faltering. In another rate-setting meeting on Thursday, the
Bank of England cut borrowing costs, citing a weak economic
"Mr. Trichet co-operated today and the market got what it
wanted," said Joe Trevisani, chief market analyst at FX
Solutions in Saddle River, New Jersey. "He said there are
downside risks to growth and 4 percent rates allow for price
stability. The market is saying the next move will be a cut."
In late afternoon New York trading, the euro was down 1
percent at $1.4474 <EUR=> after dropping as low as $1.4442. The
euro has lost 2.25 percent this week, heading for its biggest
weekly fall since August 2005.
The dollar also advanced against a basket of currencies
.DXY, gaining 1 percent to 76.897, its highest level in about
"We're at a bit of a pivot point in the euro here, and if
we can get and stay below the $1.4520 area I think that could
open the flood gates a little more," said Steven Butler,
director of FX trading at Scotia Capital in Toronto.
The dollar rose 1 percent against the yen to 107.44 yen
<JPY=>, mostly on technical trading.
"There has been talk of some semi-official buying interest
of dollar/yen on the low 106 areas and the subsequent sharp
rebound catching the market short," said Brian Dolan, chief FX
strategist at Forex.com in Bedminster, New Jersey.
The euro was little changed at 155.59 yen <EURJPY=> though
it had traded between a low of 154.06 and a high of 156.19.
Sterling fell to a two-week low against the greenback at
$1.9422 <GBP=> as the Bank of England cut rates by a quarter
percentage point to 5.25 percent, as expected, in a bid to head
off a sharp consumer-led slowdown, and signaled further gradual
policy easing ahead.
In contrast to the United States, Canada and Britain, the
ECB has not yet gone down the path of cutting interest rates
because of price pressures in the 15 countries using the euro.
In January, euro-zone inflation hit a record high.
Recent signs of faltering growth in Spain, Italy and
elsewhere in the bloc, however, suggest the ECB may soon have
to switch its attention to supporting the euro zone economy.
Reports showing U.S. weekly jobless claims benefits fell
last week and that pending sales of previously owned homes slid
a steeper-than-expected 1.5 percent in December had little
The U.S. Federal Reserve has already slashed rates by 225
basis points and is seen cutting rates at least another 75
basis points by the end of the year.
Going into the weekend, investors may be looking to any
currency-related comments from the meeting of Group of Seven
finance ministers and central bankers in Tokyo.
A G7 source told Reuters the wording of this weekend's
communique is not yet finalized with regards to foreign
exchange but no change is expected from the text of the last
meeting in October.
(Reporting by Nick Olivari and Vivianne Rodrigues, additional
reporting by Lucia Mutikani and Steven C. Johnson, Editing by
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