BLBG:Euro Falls From Six-Week High Before ECB Decision; Pound Weakens
The euro fell from a six-week high against the dollar amid speculation European Central Bank President Mario Draghi will reassure investors that policy makers will keep interest rates low after a meeting today.
The yen weakened versus all 16 of its major counterparts after a report showed Japanese investors increased their holdings of overseas bonds for a fourth week and a rally in shares damped demand for safer assets. The pound fell for a fifth day versus the dollar before the Bank of England announces its policy decision. Sweden’s krona dropped after manufacturing expanded less than economists forecast.
“The market’s starting to anticipate the ECB,” said Geoffrey Yu, a senior currency strategist at UBS AG in London. “Draghi will probably try to tone down expectations of rates going up or hopes of an economic recovery and that should be enough to keep a lid on the euro.”
The euro fell 0.5 percent to $1.3241 at 9:14 a.m. London time after climbing to $1.3345 yesterday, the strongest level since June 19. The 17-nation currency rose 0.3 percent to 130.57 yen. The yen dropped 0.8 percent to 98.63 per dollar.
The ECB will keep its benchmark rate at a record-low 0.5 percent when policy makers meet today in Frankfurt, according to all except one of 63 economists surveyed by Bloomberg News. Wells Fargo Securities forecasts a quarter-point cut. The ECB will publish its decision at 1:45 p.m. and Draghi will hold a press conference 45 minutes later.
Previous Meeting
The euro weakened 0.7 percent versus the dollar after the previous ECB meeting on July 4 when Draghi said that monetary policy would “remain accommodative” for as long as needed to encourage growth and borrowing costs will be kept low for an extended period.
Europe’s shared currency has strengthened 3.6 percent in the past three months, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes amid signs the region’s economy is emerging from its longest-ever recession. The dollar advanced 3.1 percent and the yen rose 1.6 percent.
Japanese investors purchased 233.2 billion yen more overseas bonds and notes than they sold in the seven days ended July 26, according to figures released by the Ministry of Finance in Tokyo.
The Bank of England will keep its bond-purchase program at 375 billion pounds today ($568 billion) and its key rate at a record-low 0.5 percent, separate Bloomberg surveys showed.
The pound fell 0.2 percent to $1.5170 after declining to $1.5126 yesterday, the weakest level since June 17.
Sweden’s krona dropped 0.5 percent to 6.5514 per dollar and weakened 0.1 percent to 8.6759 per euro.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
