The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank (ECB) will raise interest rates as the economy slows.
The euro is poised for its biggest weekly loss since January 2005 after ECB President Jean-Claude Trichet said on Thursday economic growth will be “particularly weak” through the third quarter.
An index that tracks the dollar against the currencies of six US trading partners touched the highest since February. Crude oil fell to a three-month low.
“This is the beginning of a new chapter for the dollar as Trichet and other central banks are paying more attention to the downside risk to growth,” said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. “The decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth.”
The euro declined 1.95 percent to US$1.5032 at 10:23am in New York on Friday and reached US$1.5005, the lowest level since Feb. 27, from US$1.5325 on Thursday. It dropped as much as 2.08 percent, the biggest one-day drop since Sept. 6, 2000.
Against the yen, the euro traded at ¥165.84, from ¥167.70. The dollar rose 0.5 percent to ¥109.97 after touching ¥110.08, the strongest since Jan. 10.
The pound fell below US$1.93 for the first time since March last year as the Bank of England kept its main interest rate steady at 5 percent on Friday after inflation accelerated and the economy teetered on the brink of a recession. It has dropped 2.7 percent this week to US$1.9210, its biggest weekly drop in three years.
The euro’s decline below US$1.53 and the break of the 200-day moving average at US$1.5226 “marks a significant change in sentiment for the dollar,” pointing to a further decline to US$1.46, Kevin Edgeley, a London-based technical analyst at Goldman Sachs Group Inc, wrote in a report on Friday.
The euro has declined 3.1 percent against the dollar in its fourth weekly decline, the worst losing streak since May last year. Against the yen, the US currency has advanced 2.1 percent, heading for its biggest weekly gain in almost two months.
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