The euro extended its losses against major currencies in Asia on Friday amid growing speculation that the European Central Bank may cut interest rates to stimulate the euro-zone's fragile economy.
Meanwhile, the yen rose, as weak stock markets spurred buying of the safe-haven currency. Speculation that the ECB may cut rates was kindled by weaker-than-expected inflation data Thursday.
The euro-zone's annual inflation rate fell sharply to 0.7% in October, from 1.1% in September, the lowest level in four years.
That is also far below the ECB's inflation target of just under 2%. "There is a fifty-fifty chance the ECB will cut rates," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, noting that concerns about a housing bubble in Germany augur against such a cut.
"Yet, the ECB is highly likely to keep open the option of a future rate cut," which could drag on the euro, he added.
The ECB will hold its policy-setting meeting Nov. 7. At 0450 GMT, the euro was at $1.3556 against $1.3582 in late New York Thursday.
The single currency was at Y132.63, down from Y133.52. The dollar was at Y97.83 from Y98.35. A better-than-expected manufacturing purchasing managers index from China did little to cheer risk sentiment.
The index rose to 51.4 in October from 51.1 in September, higher than the median 51.1 forecast of nine economists.
Rather, a fall in Asian stock markets following a drop on Wall Street overnight undermined risk sentiment, prompting traders to buy yen. "Stock markets are key," said Dai Sato, senior vice president of the forex division at Mizuho Bank.
Many dealers say the dollar's topside will be capped at Y99 in the near term. But Mr. Sato said the pair may rise as high as Y100 next week if strong U.S. economic data raise expectations that the Fed will bring forward tapering of its bond-purchase program to January from March.
The Chicago Purchasing Managers Index for October surged past expectations to 65.9 Thursday, the best reading since April 2011. While the partial U.S. government shutdown in October put the credibility of some U.S. data in doubt, "people can't ignore if more strong U.S. data come out," he said.
The market is now focusing on the release of U.S. October ISM manufacturing data later in the global day. The WSJ Dollar Index, which measures the dollar against a basket of major currencies, was at 72.61 from 72.63.
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Meanwhile, the yen rose, as weak stock markets spurred buying of the safe-haven currency. Speculation that the ECB may cut rates was kindled by weaker-than-expected inflation data Thursday.
The euro-zone's annual inflation rate fell sharply to 0.7% in October, from 1.1% in September, the lowest level in four years.
That is also far below the ECB's inflation target of just under 2%. "There is a fifty-fifty chance the ECB will cut rates," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, noting that concerns about a housing bubble in Germany augur against such a cut.
"Yet, the ECB is highly likely to keep open the option of a future rate cut," which could drag on the euro, he added.
The ECB will hold its policy-setting meeting Nov. 7. At 0450 GMT, the euro was at $1.3556 against $1.3582 in late New York Thursday.
The single currency was at Y132.63, down from Y133.52. The dollar was at Y97.83 from Y98.35. A better-than-expected manufacturing purchasing managers index from China did little to cheer risk sentiment.
The index rose to 51.4 in October from 51.1 in September, higher than the median 51.1 forecast of nine economists.
Rather, a fall in Asian stock markets following a drop on Wall Street overnight undermined risk sentiment, prompting traders to buy yen. "Stock markets are key," said Dai Sato, senior vice president of the forex division at Mizuho Bank.
Many dealers say the dollar's topside will be capped at Y99 in the near term. But Mr. Sato said the pair may rise as high as Y100 next week if strong U.S. economic data raise expectations that the Fed will bring forward tapering of its bond-purchase program to January from March.
The Chicago Purchasing Managers Index for October surged past expectations to 65.9 Thursday, the best reading since April 2011. While the partial U.S. government shutdown in October put the credibility of some U.S. data in doubt, "people can't ignore if more strong U.S. data come out," he said.
The market is now focusing on the release of U.S. October ISM manufacturing data later in the global day. The WSJ Dollar Index, which measures the dollar against a basket of major currencies, was at 72.61 from 72.63.
nasdaq.com
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