The euro fell to a one-month low against the dollar after European Central Bank President Jean- Claude Trichet’s pledge to boost confidence failed to assuage concern the bank’s policy makers are split.
The Dollar Index rose for a fourth day before a report that may show consumer confidence in the U.S. increased for a second month, underpinning signs its recession may be easing. The euro fell against 15 of 16 major currencies monitored by Bloomberg after a report yesterday showed February factory output in the region plunged, fueling concern the slowdown is deepening.
“The euro is out of favor,” said Neil Jones, head of European hedge fund sales in London at Mizuho Corporate Bank Ltd. “The market is worried about uncertainty of policy measures. The ECB is likely to embark on quantitative easing given the economic situation, but how are they going to do that is the question.”
The euro dropped to $1.3082 as of 9:48 a.m. in London from $1.3186 in New York yesterday. It fell as low as $1.3068, the weakest since March 18, and is heading for a second weekly loss. The currency slid to 129.96 yen, from 130.90 yen. The dollar was little changed at 99.37 yen, from 99.27 yen.
The pound was also little changed at 88.27 pence per euro, and fell 0.7 percent to $1.4817, from $1.4925.
Trichet said in Tokyo today the ECB must do everything possible to boost confidence and any uncertainty about the direction of policy will postpone a recovery in the 16-nation region’s economy.
“Any ambiguity in our medium-term policy direction would delay the return of sustainable prosperity, because that would undermine confidence, which is the most precious ingredient in the present circumstances,” Trichet said.
ECB council member Axel Weber said April 15 the bank shouldn’t cut rates below 1 percent, putting him at odds with policy makers who say borrowing costs must fall close to zero. Council members George Provopoulos from Greece and Athanasios Orphanides of Cyprus have indicated they may support cutting the 1.25 percent target rate below 1 percent and purchasing debt to pump money into the economy.
The ECB will lower its benchmark rate by a quarter- percentage point to 1 percent on May 7, according to a Bloomberg News survey of economists.
The yen fell against nine of the 10 most-traded Asian currencies today on speculation a gain in stocks will encourage investors to buy more higher-yielding assets. The MSCI Asia- Pacific Index of regional shares rose 0.8 percent and the Nikkei 225 Stock Average climbed 1.7 percent.
Source: Bloomberg.
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