The euro plunged to an 11-week low against the dollar after a key European Central Bank official said that the bank is ready to boost stimulus if necessary.
The euro plunged 0.4 percent to $1.3665 in mid-morning trade in London after earlier declining to $1.3664, the weakest since February 27. The 18-nation currency fell 0.3 percent to 139.29 yen, and fell to 139.28, its lowest level since March 4. The Japanese currency remained slightly unchanged at 101.90 for a dollar.
ECB vice President Vitor Constancio said that “we have reaffirmed our forward guidance and stressed that we are determined to act swiftly if required and do not rule out further monetary policy easing.”
Repeated verbal sentiments by key ECB policymakers hinting at possible monetary easing have seen the shared currency decline 1.1 percent in the last four weeks, making it the worst performing currency after the Swiss franc of all the 10 advanced-economy currencies monitored by Bloomberg Correlation-Weighted Indexes.
Some of the possible moves ECB may employ to tame deflation and stronger euro include slashing all interest rates and boosting loans to small and mid-sized companies. The bank’s Executive Board member Yves Mersch was quoted by Reuters today as saying it may introduce negative interest rates on deposits, among other measures.
“The ECB has so many options on the table for June that it is difficult to go and buy the euro,” said Ian Gunner, a fund manager with Altana Hard Currency Fund. “But another rate cut will definitely not be good enough.”
The euro zone GDP expanded 0.2 percent in the first three months, which was less than the 0.4 percent growth that economists had forecasted. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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