The euro slumped to the lowest in four and a half-year against the dollar after the European Central Bank signaled it will embark on large-scale government-bond purchases as the Federal Reserve moves closer to raising interest rates.

The 19-nation common currency slid for a third week after ECB President Mario Draghi said he can’t rule out deflation in the euro area. The yen also declined for a third week. The rouble plummeted 9.4 per cent to lead emerging-market peers lower. The dollar advanced gained against all of its 16 major peers before a report next week that may show the jobless rate fell to a six and a half-year low.

“The US labor market is performing well and the unemployment rate is falling further,” Ralf Umlauf, head of research for Helaba Landesbank Hessen-Thueringen in Frankfurt, said by phone on Friday. “In the euro zone, it’s a completely different picture. We have still very high unemployment rates near the historical top. So that’s the reason why we have the divergence in monetary policies.”

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