Sydney - The euro is set for its longest stretch of weekly declines versus the yen since the common currency’s creation in 1999 as anticipation builds that the European Central Bank will surprise some investors with the size of its stimulus next week.
The 19-nation currency is also headed for its biggest monthly loss since March versus the greenback, notching up declines against all but the Danish krone among 16 major peers. Reports on Friday are forecast to show industrial confidence in the region deteriorated in November, while annual price pressures in Spain remained negative. Australia’s dollar is poised to end a series of weekly gains as swaps signal increasing odds that the Reserve Bank will lower benchmark rates in the first quarter of 2016.
“If there’s anyone who has the market’s firm belief that they can over-deliver, it’s always going to be Mario Draghi,” Chris Weston, chief market strategist in Melbourne at IG, said of the ECB president. “The reason we haven’t started seeing traders looking to fade the euro with any great conviction is there’s a genuine belief that he’s guided the market to an extent and can come out and do more.”
The euro fetched 130.11 yen as of 12.27pm in Tokyo, set to complete a seven-week slide of 4.8 percent.
Europe’s common currency was at $1.0610, down 0.3 percent this week and 3.6 percent since October 30. It slid to $1.0566 on Wednesday, the lowest since April. US financial markets were shut on Thursday for Thanksgiving.
Draghi decision
ECB policy makers will meet on December 3. Australia & New Zealand Banking Group estimates that movements in swap rates since the last meeting indicate that markets need Draghi to deliver at least a 14 basis point cut to the deposit rate along with an expansion of its quantitative easing programme. The deposit rate is currently at minus 0.2 percent.
Australia’s dollar held a two-day decline as swap prices indicated there’s a 36 percent chance the Reserve Bank will lower its key rate by March-end. The probability was about 31 percent on November 23.
The Aussie was little changed at 72.23 US cents, set for a 0.2 percent drop this week.
BLOOMBERG