Euro drops below $1.10 for first time since Sept. 2003
Frankfurt (Mar 5) The euro extended a long slide on Thursday and traded below $1.10 for the first time since September 2003 on selling coming after the European Central Bank said it will begin massive bond buying next week.
The euro traded as low as $1.0988 before recovering to $1.10105, off nearly 1 percent for the day, according to Thomson Reuters data.
ECB president Mario Draghi spoke after the central bank, in its battle against euro zone economic sluggishness and low inflation, pushed up its 2015 and 2016 growth forecasts and fixed a March 9 start date for bond purchases of 60 billion euros a month.
Analysts have suggested the ECB would distort the bond market by buying bonds with negative yields. Draghi said it would only steer clear of bonds yielding less than the ECB's -0.2 percent deposit rate.
"Some people are interpreting some of the comments by Mario Draghi as very dovish for the euro," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie in New York. "That's why we broke through some stops and got down to about 1.10."
Draghi also said the central bank would continue to buy government bonds beyond 2016 if it hand not reached its inflation goal by then.
"Mr. Draghi is showing that the ECB is determined to continue until it gets the results it needs. They are perfectly aware that they cannot afford to fail," Allianz Global Investors senior fixed income portfolio manager, Mauro Vittorangeli, said.
Draghi's remarks also led to European shares reached their highest levels in more than seven years on Thursday.
Against the British pound, the euro fell 0.4 percent to 72.23 pence, its lowest since December 2008.
The dollar hit a fresh 11-year high against a basket of major currencies. The dollar index rose as high as 96.47, its strongest since September 2003.
Against the yen, the dollar pushed through the 120 yen level and was last up 0.4 percent at 120.14 with traders citing buying by U.S. macro funds keen to cover short dollar positions.
Currency traders were also focused on Friday's U.S. employment report for February, when harsh winter weather in large portions of the United States may have curbed hiring, Wizman said. The labor market has been a central driver of America's relatively bright economic outlook and the dollar's rally.
Source: CNBC
