Euro Hits 11 Year Lows After ECB, Could Be Headed To $1 Parity
Euro Hits 11 Year Lows After ECB, Could Be Headed To $1 Parity
Euro falls sharply, hits 11-year lows as sellers rush in after ECB
The Euro (FXE) was falling on Friday, tumbling to levels not seen in 11 years as reaction to a massive asset-purchasing program from the European Central Bank continued to take a toll on the single currency.
Aussie Dollar (FXA) also hits new low under $0.80. In Australia, the dollar ripped lower against the U.S. currency.
ECB President Mario Draghi said Thursday the central bank will buy 60 billion Euros ($69 billion) of public and private-sector debt every month until at least September 2016, or even later if needed. The move is aimed at supporting growth and lifting inflation expectations in the eurozone.
The euro (EURUSD) fell to $1.1158 Friday, compared with $1.1361 late Thursday in New York. It also slid against the Japanese yen (EURJPY) , dropping to Y131.58, from Y134.65 late Thursday.
As the euro fell, European stocks were on a tear, with the Stoxx Europe 600 index up nearly 2%.
Simon Smith, chief economist at FxPro, said the next level to watch for the euro is the September 2003 low of $1.0765.
The shared currency could be near parity with the greenback by December 2016, analysts at Bank of America Merrill Lynch said Friday. The bank slashed its forecast for the euro in that month to $1.05, from $1.15 previously. It sees the currency at $1.14 in June 2015, compared with its previous view of $1.21. By the end of this year, the analysts expect the euro to weaken to $1.10, against prior calls for $1.20.
In the wake of the ECB, the Aussie dollar (AUDUSD) fell to below $0.80 for the first time since July 2009. It was last trading at a session low of $0.7946 in Asian trade and was barely hanging onto that level in early European trading hours. Surprise rate cuts around the world have weighed on the currency, as have weak commodity prices.
Asia slow to react: Investors were "not fully responding during Tokyo time" to the ECB's policy move to adopt quantitative easing, given the proximity of the Greek election on Sunday, said a senior Japanese bank dealer.
But the dealer said the ECB's robust stance over monetary easing will likely set to the euro to give it the status of the weakest major currency in the world, adding that a fall in the euro to as far as the $1.100 range is very likely.
Elsewhere in Asia, stock markets showed a warm reception to the ECB's massive easing program. The Nikkei Stock Average closed up 1.0%, while the Shanghai Stock Exchange Composite Index, +0.25% gained 0.3%.
Shinji Kureda, head of FX trading group at Sumitomo Mitsui Banking Corp., said the monetary easing mood across the globe is a boon to riskier assets, such as stocks, that may help benefit the dollar-yen trading pair the most.
The dollar (USDJPY) (FXY) was at Y117.93, down from Y118.56 in late Thursday trade in New York.
Soon after the ECB action, Denmark cut its main interest rate on Thursday for the second time this week as it sought to damp interest in its currency among investors selling the euro. Earlier this week, Canada dropped its benchmark overnight rate Wednesday, citing it as "insurance" against the potential economic toll of plunging prices for oil, a key Canadian export.
The WSJ Dollar Index BUXX (UUP), a measure of the dollar against a basket of major currencies, was up 0.7% to 85.53.
Courtesy of MarketWatch.com