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Euro Drops to 5-Month Low on Rate Outlook

August 8, 2008 at 10:47 by Andriy Moraru

EuroThe euro fell to its five-month lowest level against the U.S. dollar as the investors traded on the high probability that the ECB won’t be raising interest rate as the economy is slowing.

The euro also declined against the Japanese yen, falling to its 3-week low against this currency. Yesterday European Central Bank President Jean-Claude Trichet said that the Eurozone economy will be particularly weak in the third quarter of 2008, snapping all hopes for the interest rates increases in the near future.

The Australian and New Zealand dollars accompanied the euro in its fall. They were among the leaders of the worst performers of the 16 most-traded world currencies as the traders expect rate cuts in those countries.

Market analysts believe that Trichet opened a way for quite a long declining trend for euro. Eurozone currency may go down significantly below the current level as the huge confidence in the ECB’s extreme hawkishness was removed by the yesterday’s commentary.

EUR/USD lost almost than 1.2 percent already today, falling down from 1.5324 to 1.5163 as of 8:34 GMT; the daily minimum lies at 1.5140 — the lowest level since February 28. EUR/JPY fell from 167.57 to 166.69 today — its new minimum since July 17. EUR/GBP declined slightly today — it went down from 0.7886 to 0.7866 with a daily low at 0.7849.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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