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Euro in freefall

January 5, 2015

The euro has lost further ground against the greenback, reaching levels not seen since 2006. Analysts contributed the continuing freefall to the uncertain situation in Greece and ECB comments on monetary policy.

https://p.dw.com/p/1EEy4
Euro and dollar signs
Image: ullstein bild - Klein

The 19-member euro area's single currency dropped to a near nine-year low in the first trading hours on Monday.

It fell to as low as $1.186, reaching a level last seen in March 2006 and hovering below the psychologically important threshold of $1.20. Some pundits had maintained earlier the euro and the greenback could even reach parity later in the year.

The continued slide of the euro came in the wake of comments made by ECB President Mario Draghi last Friday. In an interview with the German business daily Handelsblatt he had said the risk of the central bank not fulfilling its mandate of preserving price stability was higher now than half a year ago.

Search for the cure-all

Draghi thus hinted at the ECB's resolve to resort to more unconventional measures in its monetary policy.

"The market took his comments to mean he's ready to adopt quantative easing," said Barclays strategist Shin Kadota, with the purchase of sovereign debt seen as an option in the fight against deflationary worries.

The US dollar also surged against the Swiss franc and the British sterling, extending a recent bull run as markets responded to a relatively healthy US economy, banking on the Federal Reserve to raise rates in mid-2015.

hg/pad (Reuters, dpa)