Euro Set for Weekly Drop; Dollar Gains as Spending Cuts Begin

The euro was poised for its longest stretch of weekly declines since June on prospects for lower interest rates in the region with data today forecast to confirm a manufacturing contraction worsened.

Europe’s common currency fell in February, snapping six months of gains, as European Central Bank President Mario Draghi said this week the bank is “far” from exiting stimulus measures. Annual consumer-price growth slowed in February, a report today will probably show. The dollar and yen were set to advance against most major peers this week as the U.S. Senate rejected a pair of partisan proposals to replace $85 billion in automatic spending cuts set to begin today.

“Everyone thought that Europe was saved, but looking at the data of late, things aren’t looking that great,” said Richard Breen, a Sydney-based senior consultant at Rochford Capital, a currency and interest-rate risk management company. “Weak manufacturing data there is going to continue to put pressure on the euro.”

The euro was at $1.3064 as of 9:28 a.m. in Tokyo and has declined 1 percent this week. It traded at 120.91 yen from 120.85 yesterday, set for a 1.9 percent drop since Feb. 22. The yen fetched 92.55 per dollar from 92.56 yesterday and 93.42 last week.

The 17-nation euro slid against 14 of its 16 major peers in February, losing 3.8 percent against the greenback and 3 percent against the yen. The dollar rose 0.9 percent versus the yen last month, a fifth monthly gain, the longest winning streak since August 2008.

(Source: Bloomberg)