By Wanfeng Zhou
NEW YORK, Nov 1 (Reuters) - The euro fell for a fifth day
against the dollar on Friday, heading for its biggest weekly
loss in 16 months, on growing expectations the European Central
Bank will ease monetary policy further to protect growth.
More losses are likely as traders said the single currency's
climb in recent months was overdone. The euro hit a 23-month
high above $1.38 last Friday, a gain of more than 8 percent from
Plunging euro zone inflation is raising the specter of
deflation in some areas and fueling bets the ECB will be forced
to ease monetary policy in coming months. A rate cut would erode
the euro's interest rate advantage over other major currencies.
'Speculation that the central bank may cut rates next week
has led to the euro bearing the brunt of the greenback's
new-found resilience,' said Samarjit Shankar, director of market
strategy at BNY Mellon in Boston.
The euro fell as low as $1.3478, according to Reuters
data, its lowest since Oct. 16. It was last down 0.7 percent at
$1.3488 after having fallen 1.1 percent on Thursday, its biggest
one-day drop in more than six months.
Near-term support lies around $1.3480 heading into the ECB
meeting. Below that level, some traders said the euro could
potentially fall towards $1.3250 or even $1.30.
The euro at current levels is poised to end the week 2.3
percent lower, the largest weekly loss since early July.
The ECB meets next Thursday. Money markets, which were
already pricing in the possibility of looser ECB policy in the
coming year, now reflect an outside chance of a move in the next
Vassili Serebriakov, foreign exchange strategist at BNP
Paribas in New York, said while his firm is not expecting an ECB
rate cut at its November meeting, it is forecasting one at the
December meeting. BNP sees the euro at $1.32 at year end.
The euro's losing streak against the greenback marked its
longest stretch in two months. It also fell 0.3 percent to
133.19 yen but gained 0.1 percent versus sterling , which came under pressure after disappointing UK
The dollar rose 0.4 percent to 98.76 yen and was on
track for a weekly gain of 1.4 percent, the best weekly
performance since mid-July.
The dollar index, which measures the greenback against a
basket of six major currencies, rose 0.7 percent to its highest
since mid-September at 80.729, far above a nine-month
trough of 78.998 plumbed a week earlier.
The dollar rallied after the Federal Open Market Committee,
the Federal Reserve's policy-making arm, on Wednesday dropped a
phrase from its September meeting that noted tight financial
Investors should expect more dollar buying and euro selling,
said Richard Cochinos, G10 strategist at CitiFX, a division of
Citigroup in New York.
'As the growth story in Europe changes, the equity flow
investment that has been supporting euro/dollar should fall,'
Cochinos said. 'When you look at equity positions, they are just
beginning the rebalancing.'
Adding to dollar strength was data showing U.S.
manufacturing sector expanded at its fastest pace in years in
October despite a partial government shutdown during the first
half of the month.
St. Louis Federal Reserve Bank President James Bullard said
on Friday the Fed should wait for signs that U.S. inflation is
heading higher before starting to scale back its massive
(Additional reporting by Julie Haviv; Editing by Nick
Keywords: MARKETS FOREX/
(Currency bid prices at 3:48 p.m. EDT (1948 GMT). All data taken from Reuters calculated from the levels at 4:30 p.m.(2030 GMT) in the previous New York session. Last US Close Pct YTD Pct 2012 Oct. 31 Change Change Close ------------------------------------------------------------- Euro/dlr 1.3488 1.3582 -0.69 +2.23 1.3194 Dlr/yen 98.780 98.350 +0.44 +13.88 86.740 Euro/yen 133.24 133.59 -0.26 +16.42 114.45 Dlr/swiss 0.9123 0.9066 +0.63 -0.35 0.9155 Stg/dlr 1.5922 1.6040 -0.74 -2.02 1.6251 Dlr/cad 1.0426 1.0428 -0.02 +5.09 0.9921 Aus/dlr 0.9432 0.9458 -0.27 -9.25 1.0393 Euro/swiss 1.2307 1.2314 -0.06 +1.92 1.2075 Euro/stg 0.8470 0.8460 +0.12 +4.39 0.8114 Nzd/dlr 0.8231 0.8260 -0.35 -0.63 0.8283 Dlr/Norw 5.9652 5.9396 +0.43 +7.26 5.5630 Euro/Norw 8.0499 8.0698 -0.25 +9.67 7.3)
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