The Euro Falls on Speculation ECB Will Cut Rates to strengthen the Economy

The euro fell against the dollar and weakened versus the yen on speculation the European Central Bank will lower interest rates today to halt the region's contraction. Economists forecast the ECB will lower its main refinancing rate by a half- percentage point to 3.25 percent. ``Look for the euro to remain in a broad downtrend,'' Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, the second-largest currency trader, wrote in a research note yesterday. ``Our economists expect the ECB to cut half a percentage point and think the press conference could be more dovish than expected, leaving the door open for more rate cuts.'' The EUR/USD is currently trading at $1.2920 as of 8:28am, GMT.

The pound fell against the dollar before the Bank of England meets today to decide on interest rates amid mounting evidence the economy, Europe's second largest, is in a recession. The British currency dropped versus the dollar for a second day. Policy makers will probably lower the key rate by half a percentage point to 4 percent according to economists and traders. Data on Wednesday that showed the fastest rate of decline in the UK services sector in October since 1996, and futures markets attached around a 40 percent probability the BoE will cut rates a full percentage. The GBP/USD is currently trading at $1.5970 as of 9:02am, GMT.

The Bank of Japan may be powerless to prevent the yen from rising to a 13-year high, according to the world's biggest foreign-exchange traders. Deutsche Bank AG, UBS AG and Barclays Plc predict the yen will recover from its steepest weekly decline since 1999 as investors reduce carry trades that fund purchases of higher- yielding assets by borrowing in Japan. ``Once the market realizes that we're now in a global recession, there's further deleveraging to come,'' said Geoff Kendrick, a senior currency strategist in London at UBS, the second-biggest trader in the $3.2 trillion-a-day market. Traders ``are capitulating'' after five years of bets against the yen, he said in a Nov. 4 interview. The USD/JPY is currently trading at 97.98 as of 9:06am, GMT.

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