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The EUR slumps to a five month low as the ECB indicates it won't hike rates anym

Fri, Aug 8 2008, 11:09 GMT
by Benny Menashe

Finotec Group Inc.

The euro slumped to a five-month low against the dollar as traders pared bets that the European Central Bank will raise interest rates as the economy slows. The euro also fell to a three-week low versus Japan's currency after ECB President Jean-Claude Trichet said economic growth will be ``particularly weak'' through the third quarter. The dollar headed for its biggest weekly gain against the yen in almost two months as oil dropped 19 percent from a record. ``Trichet triggered the euro's decline when he went out of his way to highlight weakness in the economy,'' said Saburo Matsumoto, senior manager of foreign-exchange sales at Sumitomo Trust & Banking Co. in Tokyo. ``A rate increase is off the cards for the time being, and the euro is likely to adjust lower.'' The EUR/USD is currently trading at$1.5133 as of 9:46 am, GMT.

The British currency slid for a sixth day, falling below $1.93 for the first time since March 2007 as RBS, the U.K.'s second-biggest bank, reported a 802 million-pound first-half loss. A record drop in U.K. house prices has erased two years of gains, the London-based Times newspaper said, citing statistics from mortgage lender Halifax, a unit of HBOS Plc. ``It looks like the U.K. economic picture is going to deteriorate further and we are going to see sterling come under increasing pressure,'' said Ian Stannard, a senior currency strategist at BNP Paribas SA in London, who predicts the pound will fall to $1.85 by the end of the year. ``The next housing data in particular looks like it is going to be disastrous.'' The GBP/USD is currently trading at 1.9235 as of 10:13 am, GMT.

The Australian dollar fell for a ninth day, the longest losing streak since 1980, as traders increased bets the central bank will reduce borrowing costs from a 12-year high. Australia's currency headed for a third weekly loss, breaking through 90 U.S. cents for the first time in more than four months, as Reserve Bank of Australia Governor Glenn Stevens said on Aug. 5 that there was ``scope to move towards a less restrictive stance of monetary policy'' because of slowing consumer demand. The Australian dollar also declined after prices of commodities the nation exports such as crude oil and gold slid this week. The AUD/USD is currently trading at 0.8908 as of 10:17 am, GMT

Today's Economic Events

Published on  Fri, Aug 8 2008, 11:12 GMT