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Euro hits fresh one-year low

Monday, September 01 08:17:46

The euro hit a fresh one-year low on Monday, as heightened worries about the crisis in Ukraine kept the currency on the defensive ahead of a European Central Bank policy meeting later this week.

The euro fell as far as $1.3119, reaching lows not seen since early September 2013. It last traded at $1.3125, down 0.1 percent on the day.

Analysts said the risk to euro zone growth posed by the Ukraine conflict and stubbornly low inflation should keep the pressure on the European Central Bank to provide further stimulus at some stage, if not this week.

While the euro could gain on short-covering if the ECB were to stand pat at its policy meeting on Thursday, any respite is likely to be short-lived, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

Expectations for further ECB monetary stimulus in coming months will likely remain intact and weigh on the euro, he said.

"Germany's economy is starting to show some signs of weakness, and I think it will probably be difficult (for the ECB) to remove its easing bias," Murata said.

The euro started September on a weak note after posting its second straight month of losses versus the greenback in August, when it slid 1.9 percent following a 2.2 percent drop in July.

"It is too early for the ECB to announce new policy measures, given that the two most powerful policies announced in June are not yet deployed," analysts at Barclays said, referring to the ECB's targeted long-term repo operations and asset-backed securities purchases.

"But a minority of market participants expect new policy at this week's meeting. As a result, inaction may be greeted by temporary relief from euro depreciation, but we would see any short-term rallies as a selling opportunity," they wrote in a note to clients.

The euro held steady above a near two-year low versus the Swiss franc after the head of the Swiss National Bank (SNB) said it stood ready to intervene in the currency market to defend its cap on the franc.

The euro last stood at 1.2064 francs, staying above last week's low of 1.2049 on trading platform EBS, its lowest level versus the Swiss franc since late 2012.

The SNB introduced a 1.20 per euro cap in 2011 to prevent the franc's strong appreciation from further hurting the economy, although it has not had to defend the cap for the last two years. (Reuters)

For more visit: www.businessworld.ie