London: The euro hit an 11-year low against the dollar and the region’s stocks nudged higher on Thursday, as the European Central Bank prepared to provide the finer details of its soon-to-be-launched €1 trillion (Dh4.05 trillion) stimulus plan.
The common currency fell to as low as $1.1026, its lowest level since September 2003 and the region’s stock and periphery bond markets opened up as hopes for the ECB’s policy meeting in Cyprus lifted investors’ spirits.
The slide in the euro came as the dollar continued to claw higher on bets the US. Federal Reserve — in sharp contrast to the ECB — is heading for its first rate hike in almost a decade this year.
For the last six week’s the ECB has been working on exactly how it will choreograph the massive quantitative easing plan sketched out in January amid lingering resistance from countries such as Germany and technical issues that need ironing out.
“We want to know all the details that put the meat on the bones of how they are actually going to do it,” said Neil Murray, head of pan-European fixed income at Aberdeen Asset Management.
Potential losses
“Are they going to do it as any auction ... will they look at the full German curve but only out to five years on BBB rated countries, or will they be happy to look at 10-years on all countries until they can’t buy anymore.” Eurozone borrowing costs lurked around record lows as traders put the finishing touches on positions ahead of the ECB’s 1330 GMT post-meeting news conference.
German two-year yields were minus 0.20 per cent, in line with the ECB’s deposit rate as markets questioned whether the bond-buying scheme would include assets that yield less than that as it would leave the ECB facing potentially large losses.
Elsewhere, the rise in the dollar was keeping emerging markets, which use what is becoming increasingly expensive dollar debt to help fund themselves, under the cosh.
Alongside the pressure on the widespread of currencies, EM stocks on MSCI’s benchmark index were down for their fifth straight day.
