Euro Near 6-Week Low as Inflation Set to Fall to Three-Year Low

The euro slid toward a six-week low before a report that will probably confirm inflation in the 17-nation region was the slowest in three years.

The common currency completed a five-day drop yesterday, the longest losing stretch in six months, on speculation the European Central Bank will ease policy after data showed the euro-area economy extended its recession to a record sixth quarter. The Dollar Index (DXY) was 0.5 percent from its highest level since July before Federal Reserve Bank of San Francisco President John Williams speaks. The yen advanced after reports showed the nation’s economy expanded more than forecast.

“The euro will probably continue its downward trend,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Should CPI data confirm low inflation, that would further heighten expectations of an ECB rate cut.”

The euro was little changed at $1.2888 as of 9:29 a.m. in Tokyo after yesterday touching $1.2843, the weakest since April 4. The shared currency slipped 0.2 percent to 131.54 yen. The dollar traded at 102.23 yen from 102.25 yesterday, when it touched 102.76, the strongest level since October 2008.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the currency against those of six major U.S. trade partners, declined 0.1 percent to 83.707 and yesterday reached 84.094, the highest level since July 24.

(Source: Bloomberg)