Euro at almost 11-year low as QE looms; loonie drops on rate cut
The euro was at almost an 11-year low as the European Central Bank prepares for a policy meeting at which they are forecast to adopt a sovereign-bond purchase program under the quantitative-easing strategy.
The 19-nation shared currency pared gains against the dollar after Bloomberg reported that two central-bank officials said policy makers will propose purchasing 50 billion euros ($58 billion US) in assets per month through the end of 2016. A decision will be announced tomorrow in Frankfurt. Canada's dollar plunged after the central bank unexpectedly cut interest rates. The yen climbed for the first time in four days the Bank of Japan refrained from adding to stimulus. The Swiss franc rolled on.
"These rumors are consistent with what the ECB has to do - - once that's out, we'll see the euro come under long-lasting depreciation pressure in the next three to six months," Peter Kinsella, a senior currency strategist at Commerzbank AG in London, said in a phone interview. "From a fundamental point of view, there's no reason to buy the euro. You have a central bank which is actively looking to weaken the currency, and it's pretty much all you need to know."
The euro appreciated 0.4 percent to $1.1599 at 11:42 a.m. New York time after adding as much as 1.1 percent. It declined to $1.1460 on Jan. 16, the least since 2003. The shared currency dropped 0.6 percent to 136.47 yen. Japan's currency strengthened 0.9 percent to 117.73 per US dollar.
'MASSIVE SURPRISE'
The loonie was the biggest loser of the U.S. dollar's 31 major peers, sliding to an almost six-year.
The currency erased earlier gains after the central bank unexpectedly cut its benchmark interest rate to 0.75 percent from 1 percent, where it had been since 2010, citing "the recent sharp drop in oil prices." All 22 analysts surveyed by Bloomberg News before the release predicted the central bank would hold rates.
The loonie fell 2.1 percent to $1.2369, after touching $1.2376, its weakest since April 2009. It dropped as much as 2.2 percent, the most since September 2011.
"That is a massive surprise and dollar-CAD is already surging," Matt Weller, an analyst at Gain Capital Holdings Inc. in Grand Rapids, Michigan, said by phone. "We anticipated some dovish rhetoric, but not any actual action from the Bank of Canada, so I think this cut here may be reflecting the weakness in oil prices."
Futures on crude, Canada's largest export, traded at $47.70 a barrel in New York, down from $107.73 in June.
POUND DECLINESSterling fell against most of its 16 major peers after policy makers Martin Weale and Ian McCafferty dropped their calls for an interest-rate increase, leaving the Bank of England's nine-member Monetary Policy Committee voting unanimously to maintain rates at a record-low 0.5 percent.
The pound weakened 0.5 percent to 76.66 pence per euro, after reaching 75.96 pence per euro on Jan. 16, the strongest level since February 2008. Sterling fell 0.1 percent to $1.5128.
The Swiss franc gained the most against the greenback, adding 1.8 percent as the market continues to digest the end of the currency's cap versus the euro. The franc has advanced 18 percent against the dollar and 20 percent versus the euro since the Jan. 15 move.
The yen strengthened versus all except the franc among its 16 major peers after Japan's central bank in Tokyo retained its plan to increase the monetary base at an annual pace of 80 trillion yen ($682 billion US). The BOJ cut its inflation projection to 1 percent for the fiscal year starting in April, from 1.7 percent previously.
'JUMPY MARKET'
The ECB's bond-buying proposal will be discussed by the decision-making Governing Council, which could still change the design significantly, the central-bank officials said, asking not to be identified as the proposal is confidential. Purchases won't start before March 1, one of the people said.
An ECB spokesman declined to comment.
The proposal to inject as much as 1.1 trillion euros reflects President Mario Draghi's determination to expand the ECB's balance sheet to stave off the threat of deflation and put the region's economy back on the path to health.
"It's a jumpy market where I think every comment is just going to push markets one way or another," Peter Gorra, the head of foreign-exchange trading in New York at BNP Paribas SA, said by phone. "No one knows the real details about it so it's more just the shock-and-awe comments that are going to have the market nervous more than anything."
The 19-nation shared currency pared gains against the dollar after Bloomberg reported that two central-bank officials said policy makers will propose purchasing 50 billion euros ($58 billion US) in assets per month through the end of 2016. A decision will be announced tomorrow in Frankfurt. Canada's dollar plunged after the central bank unexpectedly cut interest rates. The yen climbed for the first time in four days the Bank of Japan refrained from adding to stimulus. The Swiss franc rolled on.
"These rumors are consistent with what the ECB has to do - - once that's out, we'll see the euro come under long-lasting depreciation pressure in the next three to six months," Peter Kinsella, a senior currency strategist at Commerzbank AG in London, said in a phone interview. "From a fundamental point of view, there's no reason to buy the euro. You have a central bank which is actively looking to weaken the currency, and it's pretty much all you need to know."
The euro appreciated 0.4 percent to $1.1599 at 11:42 a.m. New York time after adding as much as 1.1 percent. It declined to $1.1460 on Jan. 16, the least since 2003. The shared currency dropped 0.6 percent to 136.47 yen. Japan's currency strengthened 0.9 percent to 117.73 per US dollar.
'MASSIVE SURPRISE'
The loonie was the biggest loser of the U.S. dollar's 31 major peers, sliding to an almost six-year.
The currency erased earlier gains after the central bank unexpectedly cut its benchmark interest rate to 0.75 percent from 1 percent, where it had been since 2010, citing "the recent sharp drop in oil prices." All 22 analysts surveyed by Bloomberg News before the release predicted the central bank would hold rates.
The loonie fell 2.1 percent to $1.2369, after touching $1.2376, its weakest since April 2009. It dropped as much as 2.2 percent, the most since September 2011.
"That is a massive surprise and dollar-CAD is already surging," Matt Weller, an analyst at Gain Capital Holdings Inc. in Grand Rapids, Michigan, said by phone. "We anticipated some dovish rhetoric, but not any actual action from the Bank of Canada, so I think this cut here may be reflecting the weakness in oil prices."
Futures on crude, Canada's largest export, traded at $47.70 a barrel in New York, down from $107.73 in June.
POUND DECLINESSterling fell against most of its 16 major peers after policy makers Martin Weale and Ian McCafferty dropped their calls for an interest-rate increase, leaving the Bank of England's nine-member Monetary Policy Committee voting unanimously to maintain rates at a record-low 0.5 percent.
The pound weakened 0.5 percent to 76.66 pence per euro, after reaching 75.96 pence per euro on Jan. 16, the strongest level since February 2008. Sterling fell 0.1 percent to $1.5128.
The Swiss franc gained the most against the greenback, adding 1.8 percent as the market continues to digest the end of the currency's cap versus the euro. The franc has advanced 18 percent against the dollar and 20 percent versus the euro since the Jan. 15 move.
The yen strengthened versus all except the franc among its 16 major peers after Japan's central bank in Tokyo retained its plan to increase the monetary base at an annual pace of 80 trillion yen ($682 billion US). The BOJ cut its inflation projection to 1 percent for the fiscal year starting in April, from 1.7 percent previously.
'JUMPY MARKET'
The ECB's bond-buying proposal will be discussed by the decision-making Governing Council, which could still change the design significantly, the central-bank officials said, asking not to be identified as the proposal is confidential. Purchases won't start before March 1, one of the people said.
An ECB spokesman declined to comment.
The proposal to inject as much as 1.1 trillion euros reflects President Mario Draghi's determination to expand the ECB's balance sheet to stave off the threat of deflation and put the region's economy back on the path to health.
"It's a jumpy market where I think every comment is just going to push markets one way or another," Peter Gorra, the head of foreign-exchange trading in New York at BNP Paribas SA, said by phone. "No one knows the real details about it so it's more just the shock-and-awe comments that are going to have the market nervous more than anything."
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