By: Candice Zachariahs
The euro was 0.1 percent from its lowest in two weeks before European Central Bank Executive Board member Joerg Asmussen speaks in the run-up to a policy meeting amid signs further stimulus may be needed. Europe’s common currency held its biggest weekly drop since July 2012 before the Mario Draghi-led ECB meets on Nov. 7, when economists predict it will keep interest rates at 0.5 percent. The dollar held gains from last week against most major peers before Federal Reserve Bank of Dallas President Richard Fisher speaks today, after a Nov. 1 report showed U.S. manufacturing activity climbed to the highest in more than two years.
Australia’s dollar maintained back-to-back weekly declines before the nation’s central bank meets tomorrow. “Sentiment toward the euro has turned in the last few days and that’s been endorsed by some of their data disappointing,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “We wouldn’t be surprised to see Draghi just elevating slightly the chance for a rate cut which would keep the pressure on the euro. ”The euro traded little changed at $1.3495 as of 7:51 a.m. in Tokyo, holding last week’s 2.3 percent drop, the largest decrease since the five days ended July 6, 2012. The shared currency rose 0.1 percent to 133.19 yen. The dollar traded at 98.71 from 98.67 in New York. Japan’s financial markets are closed for a national holiday.
The euro sank last week after an Oct. 31 report showed the region’s annual inflation rate fell to 0.7 percent in October, the least since November 2009, from 1.1 percent in September. Bank of America Corp., UBS AG and Royal Bank of Scotland Group Plc forecast the ECB will cut rates at this week’s meeting, according to a Bloomberg News survey of 68 economists, with the rest predicting no change. The ECB last lowered its benchmark rate in May to a record 0.5 percent.
The euro is down 1 percent in the past week, according to Bloomberg Correlation Weighted Indexes that track 10 developed nation currencies. The greenback has climbed 1.4 percent and the yen is up 0.2 percent, the data show. The dollar rose last week versus most major peers after the Federal Open Market Committee on Oct. 30 cited “underlying strength” in the U.S. economy even as it maintained $85 billion in monthly bond buying to push down borrowing costs and spur growth. The purchases tend to debase the dollar.
The Institute for Supply Management’s manufacturing index for October rose to 56.4, the highest since April 2011, from 56.2 a month earlier, the Tempe, Arizona-based group’s report showed last week. Readings above 50 indicate growth. Economists in a Bloomberg survey called for a decline to 55. “The market has been very, very pessimistic and the data hasn’t matched that pessimism,” Speizer said. “Expectations are still quite depressed and it won’t take much to beat those expectations so the chances of the U.S. dollar rising further are quite high. ”JPMorgan Chase & Co.’s Global FX Volatility Index, which monitors price swings among currencies, rose to 8.2 percent on Nov. 1, completing its first weekly gain since the five days ended Aug. 30. The gauge closed at 7.62 percent on Oct. 28, the lowest since January.