Dubai: Weakness in the euro may continue this week from its lowest level in more than a decade even as traders eye the outcome of the Greece vote on Monday.
On Friday, the euro fell 1.4 per cent against the dollar, to $1.1206, on top of a 2.1 per cent slide the day before. It is now down 7.4 per cent against the dollar since the turn of the year and is at its lowest point in more than 11 years.
“A distinct difference in outlook from the Federal Reserve and the ECB has triggered an avalanche of flows into the dollar and out of the euro. As a result the European currency has fallen to the lowest level in more than a decade, and the weak trend should continue,” said Ole Hansen from Saxo Bank.
Draghi said last week that beginning in March, the ECB will buy 60 billion euros of debt, including government bonds, in an effort to stimulate economic growth in the Eurozone. The programme of quantitative easing will continue through September 2016, and the door has been left open for more.
The divergence between central banks in Europe and US was laid bare last week when the ECB unleashed a major attack on deflation by announcing a massive bond buying program. Meanwhile in the US the market is gearing up for a rise in official interest rates later this year, said Hansen.
The only thing that can halt this is the temptation from traders to book a very healthy profit. The Greek election today has also kept the euro under pressure so the outcome will be watched very carefully Monday, said Hansen.
Richcomm Global Services expects the euro to fall to 1.1/1 per dollar in the next few weeks.
Meanwhile, Morgan Stanley cut its estimate of where the euro will end 2015 to $1.05 from $1.12 previously. Bank of America Merrill Lynch sees the euro now falling to $1.10 by the end of the year, from $1.20 in an earlier forecast, while HSBC Holdings analysts cut their year-end expectation to $1.09 from $1.15.
