The euro fell to a two-year low against the dollar as slowing inflation in the 18 nations that share the currency boosts the case for extra stimulus from the European Central Bank to avert deflation.
Already undermined by ECB President Mario Draghi’s moves to swell the central bank’s balance sheet and lower borrowing costs, the common currency is poised for its worst quarter against the dollar since the three months through June 2010. Officials next meet on Oct. 2. Norway’s currency climbed as the nation said it will start converting some of the oil revenue it gets from abroad into kroner to cover increasing budget needs. The South Korean won dropped after a report showed factory output contracted.
The euro “is looking remarkably sickly,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The lack of price pressure in the euro zone just keeps the pressure firmly on the ECB. It is a fairly compelling picture, which shows the path of least resistance continues to be toward a lower euro.”
The euro slid 0.6 percent to $1.2605 at 10:47 a.m. London time and touched $1.2590, the weakest level since September 2012. The currency has plunged 7.9 percent this quarter. It dropped 0.5 percent today to 138.18 yen. The dollar added 0.1 percent to 109.61 yen, after climbing to 109.75 yesterday, the highest since August 2008.
While CIBC’s year-end euro forecast is $1.26, “we often find that euro-dollar goes higher into year-end so that does not rule out a test toward $1.2450 first,” Stretch said.
Consumer prices in the euro region rose an annual 0.3 percent in September, following a reading of 0.4 percent in August, the European Union’s statistics office in Luxembourg said today. That’s less than a quarter of the ECB’s target.
Norway’s krone climbed 0.8 percent to 8.1171 per euro. The won was 0.1 percent weaker at 1,055.21 per dollar, posting a 3.9 percent drop this month.