Thursday 28 Mar 2024
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TOKYO (Mar 6): The euro headed for a third weekly drop before the European Central Bank starts buying bonds and the U.S. releases jobs data that may back speculation the Federal Reserve will raise interest rates this year.

The shared currency dropped below $1.10 for the first time since September 2003 and tumbled for a sixth day on Thursday as ECB President Mario Draghi set a start date of Monday for his plan to purchase 1.1 trillion euro ($1.2 trillion) of debt. A gauge of the dollar rallied to the highest in more than 10 years as economists estimated data on Friday will show gains in nonfarm-payrolls stayed above 200,000 for a 12th straight month.

“The euro’s sharp plunge is elevating the dollar,” Takeru Kurokawa, an analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services, wrote in a note to clients. “Payrolls within expectations should be dollar supportive.”

The euro sank as much as 0.8 percent to $1.0988 on Thursday before trading at $1.1031 at 9:13 a.m. in Tokyo. Its six-day slide was the longest in more than a year. The 19-nation currency has tumbled 1.5 percent this week.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, was little changed after gaining 0.5 percent on Thursday to 1,185.15, its highest close in data going back to 2004. The dollar traded at 120.10 yen after rising to a three-week high of 120.40 yen on Thursday.

Stimulus Plan

The ECB debt purchases will total 60 billion euros each month and run through September 2016, Draghi told reporters in Nicosia, Cyprus, after a policy meeting. He said the central bank may buy bonds with yields as low as the deposit rate, which was at minus 0.20 percent Thursday. The ECB kept the main refinancing rate at a record-low 0.05 percent.

The euro will probably weaken to parity with the dollar early next year, said Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA. The currencies last traded on a one-for-one basis in December 2002.

A stronger U.S. labor market may give the Fed room raise rates this year after having kept them in range from zero and 0.25 percent since 2008. Employers probably added 235,000 jobs last month, according to the median estimate of economists surveyed by Bloomberg News.

“Markets are pricing in a rise in nonfarm payrolls of 200,000-250,000 and if the figure is within that range, the dollar could easily rise above 120.50 yen,” said Kazuo Shirai, a Los Angeles-based trader at MUFG Union Bank NA. “It will then depend on how markets see the chance of a June rate hike.”

 

 

 

 

 

 

 

 

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