The euro started the new year at 29-month lows in Asia on Friday after the head of the European Central Bank fanned expectations it would take bolder steps on stimulus this month, underlining the U.S. dollar’s expanding yield advantage.
The single currency sank as far as $1.2050 EUR=, depths last seen in mid-2012, while the dollar notched up a near nine-year peak against a basket of major currencies .DXY and bounded ahead to 120.45 yen JPY=.
The euro is now perilously close to its 2012 trough, and major chart support, at $1.2042. A break there would take it to territory not seen since June 2010.
The latest lurch lower came after ECB head Mario Draghi said the central bank stood ready to respond to the risk of deflation. Consumer price data for the euro zone due on Jan. 7 is widely expected to show a fall in annual terms.
“We are in technical preparations to adjust the size, speed and compositions of our measures early 2015, should it become necessary,» said Draghi. «There is unanimity within the Governing Council on this.”
The ECB council meets on Jan. 22 and markets are wagering heavily it will finally decide to start buying sovereign debt, following in the footstep of the U.S., UK and Japan.