Euro plunges as ECB official pledges to speed up bond purchases
The euro tumbled the most in two months against the dollar after a European Central Bank official said the bank will speed up its bond-buying program before an anticipated mid-year lull.
The single currency extended Monday’s decline after Executive Board member Benoit Coeure said the ECB will increase purchases under its quantitative-easing program from 60 billion euros ($67 billion) in May and June, ahead of an anticipated drop-off in market liquidity. The euro was already weighed down by speculation Greece’s banking system is weeks away from insolvency, and fell versus all 16 of its major peers.
Coeure’s remarks “provided an acute reminder of how fragile and volatile the markets have been in 2015,” said Lee McDarby, executive director of U.K. corporate foreign-exchange sales at Nomura Holdings Inc. in London. “The euro weakened by over 1 percent almost instantly in response.”
The euro dropped as much as 1.4 percent to $1.1160, the lowest level in a week, and was down 1.1 percent at $1.1193 as of 10:47 a.m. in London. It slipped 1 percent to 134.40 yen.
A decline through $1.10 would reignite calls for a drop to parity with the dollar, McDarby said.
QE Commitment
Coeure’s comments about injecting money more quickly into the euro-zone economy emerged Tuesday morning as the text of a speech delivered in London the day before. ECB Governing Council member Christian Noyer said separately in Paris on Tuesday that the central bank is ready to extend QE if needed.
The euro stayed lower after reports Tuesday showed regional consumer-price growth flatlined in April and German investor confidence declined this month by more than forecast in a Bloomberg economist survey.
Greece’s travails were already hurting Europe’s single currency, undoing a 4.6 percent rally in April that snapped nine months of losses. That rebound came amid signs of improvement in the 19-nation economy.
Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis said Monday they were optimistic a deal to unlock bailout funds was within reach, even as creditors warned the country has yet to comply with the terms of its emergency loans.
“We’re coming closer to the endgame for Greece,” said Lee Hardman, a London-based strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “The expectation is still an agreement will be reached between Greece and its creditors, but there’s a risk that they fail to reach one,” which may send the euro lower, he said.
[Bloomberg]
