Euro slumps after six months of gains

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Europe

After riding high for six months, euro registered a slump on Friday, as investors prepared for a European Central Bank (ECB) meeting next week where policymakers are expected to discuss the impact of the currency’s strength.

According to the Reuters report, an analyst expecting the ECB to announce a timeline for its withdrawal in bond purchase plans, and the market expects the currency’s strength will invite some comments from officials.

Reuters Photo

While, under current situation, the ECB is highly unlikely to take any decision on trimming its asset purchases, which will be phased out only slowly as the euro’s rapid gains against the dollar are worrying a growing number of policymakers.

“The ECB story expressing some concern about the euro strength was to manage market expectations, but we think the impact will be temporary as the currency remains a ‘buy on dips’ story,” said Christin Tuxen, an FX strategist at Danske Bank.

Euro slips after report ECB officials are concerned with currency’s rise /Financial Times Photo

The single currency slipped 0.25 percent to 1.1881 US dollar on Friday. It rose for six consecutive months through August, briefly touching a half year high above 1.20 US dollar this week.

The euro is expected to remain supported against the dollar as it remains undervalued compared with its peers, Morgan Stanley strategists said.

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