LONDON (Jan 14): The euro fell below its 1999 launch rate to the dollar for the first time in more than nine years on Wednesday after an adviser to Europe's highest court said an ECB bond-buying programme was legal under certain conditions.
Investors worried about global growth also pushed the safe-haven yen to a 2-1/2-month high against the common currency and to a one-month high versus the dollar.
The euro hit a nine-year low of $1.1728, down 0.3 percent on the day and below the $1.1747 level at which the single currency first traded on Reuters systems on Jan. 4, 1999.
The opinion from the European Court of Justice's advocate general had been seen as a potential roadblock to the European Central Bank moving ahead with quantitative easing, an announcement on which is widely expected next week.
"The downside risk of them declaring the OMT not legal has now been removed so it's helped firm up expectations that the ECB is in a position to deliver QE when it meets on Jan 22," said Michael Sneyd, an FX strategist at BNP Paribas in London.
The adviser told judges that the OMT bond-buying programme unveiled by the ECB in 2012 but never used did not break EU law, a blow to German critics who argue the ECB has exceeded its mandate by planning to buy bonds.
"My feeling is that this gives greater weight to (ECB President) Draghi," said Neil Mellor, a currency strategist at Bank of New York Mellon in London. "It's a sort of mini rebuff to Germany again."
The World Bank on Tuesday lowered its global growth forecast for both 2015 and 2016 due to disappointing economic prospects in the euro zone, Japan and some major emerging economies that offset the benefit of lower oil prices.
As commodities slid further, the dollar dropped to a one-month low of 116.54 yen, down over 1 percent on the day. Against the euro, the yen hit a 2-1/2-month high of 137.02 yen.
"At the moment, there is no fresh material on which to sell the yen, since it's all focused on the commodity prices, all pushing the dollar down," said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.