Euro drops

Kuwait Times - - BUSINESS -

NEW YORK:

The euro dropped yes­ter­day for the sec­ond con­sec­u­tive day af­ter the Euro­pean Cen­tral Bank on Thurs­day ex­tended its bond-buy­ing pro­gram longer than many had an­tic­i­pated, even as it cut the size of the monthly pur­chases. The ECB said it would re­duce its monthly as­set buys to 60 bil­lion eu­ros start­ing in April from 80 bil­lion cur­rently and ex­tend pur­chases to De­cem­ber from March. It re­served the right to in­crease the size of pur­chases again.

Un­der­ly­ing its prom­ise for ex­ten­sive stim­u­lus, the ECB pre­dicted inflation at 1.7 per­cent in 2019, ar­gu­ing that more-costly en­ergy could boost con­sumer prices even with­out lift­ing the un­der­ly­ing trend. “The ex­ten­sion of the pro­gram was longer than most had ex­pected, and a lot of the lan­guage ... was pretty dovish,” said Erik Nelson, a cur­rency an­a­lyst at Wells Fargo in New York. “Inflation fore­casts were pretty sub­dued all the way out to 2019, and growth fore­casts were pretty low, and the risks are tilted to the down­side.” The euro dropped to $1.0548, its low­est since Mon­day, and was last down 0.47 per­cent at $1.0566.

The US Fed­eral Re­serve is widely ex­pected to raise in­ter­est rates for the first time this year when it meets next week but may take a cau­tious tone on the econ­omy. Traders will fo­cus on the Fed’s eco­nomic pro­jec­tions, known col­lo­qui­ally as the dot plot, for in­di­ca­tions of any change in ex­pec­ta­tions fol­low­ing Don­ald Trump’s surprise elec­tion as US pres­i­dent on Nov 8. Trump’s vic­tory in­creased mar­ket ex­pec­ta­tions of greater fis­cal stim­u­lus that could boost eco­nomic growth and inflation. “In the last three or four meet­ings, we’ve seen a con­tin­ual mark­ing down in the dot plot,” Nelson said, “so even if you see the of­fi­cials main­tain the cur­rent fore­cast, it could be viewed as mildly hawk­ish.”

The dol­lar gained 0.37 per­cent to 101.47 against a bas­ket of six ma­jor cur­ren­cies. — Reuters

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