Euro Falls on Speculation ECB to Reduce Rates, Signal More Cuts

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The euro fell against the dollar on speculation European Central Bank President Jean-Claude Trichet will lower interest rates today and signal further cuts are needed to curb the deepening recession.

The euro also headed for a fourth weekly loss versus the greenback before a statistics office report that economists say will reiterate Europe’s economy shrank the most in at least 13 years last quarter. The yen dropped to a four-month low, approaching 100 to the dollar, after a report showed Japanese companies slashed spending at the fastest pace in a decade. The pound fell on expectations the Bank of England will also reduce borrowing costs today.

“Trichet’s remarks will be very important as he may say he’ll cut rates again in the future,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “This would likely cause selling of the euro.”

The euro declined to $1.2607 as of 7:42 a.m. in London from $1.2661 late in New York yesterday. The currency traded at 125.51 yen from 125.52. The yen fell as low as 99.68 per dollar, the weakest level since Nov. 5, before trading at 99.55 from 99.15 late yesterday.

The dollar climbed to $1.4173 per pound, from $1.4194 yesterday. The U.S. currency advanced to 1.1733 Swiss francs from 1.1676, and climbed to C$1.2775 from C$1.2731.

From Bloomberg News.