Euro Starts New Year at New Low

http://www.nytimes.com/2015/01/03/business/international/euro-starts-new-year-at-new-low.html

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LONDON — The euro took another downward lurch on Friday, sinking to a four-and-a-half-year low against the dollar on clear indications that the European Central Bank would soon embark on outright bond-buying.

Yields on government bonds issued by the eurozone’s heavily indebted southern members — which the bank would be expected to buy in any such campaign of bond-buying, also known as quantitative easing — fell after Mario Draghi, the central bank’s president, said the risk of the European Central Bank falling short of its mandate on inflation targeting had risen compared with six months ago.

The euro sank as far as $1.2035, depths last seen in mid-2010. The dollar climbed to close to its highest level in nine years against a basket of major currencies, and it rose to 120.50 yen.

Stock markets in Europe turned lower after initially making gains, driven by a downward revision of purchasing manager surveys for France and the eurozone as a whole. The pan-European FTSEurofirst 300 index had fallen half a percent in morning trading, and markets in Germany and France were down around 1 percent.

The divergence expected between European and American monetary policy in 2015 dominated currency markets’ thinking last year, and Mr. Draghi’s warning that the European Central Bank was preparing for more action added to expectations that it would step in soon.

“We are in technical preparations to adjust the size, speed and compositions of our measures early 2015, should it become necessary,” Mr. Draghi said. “There is unanimity within the Governing Council on this.”

The central bank’s Governing Council will meet on Jan. 22, and markets are wagering heavily that the governors will finally decide to start buying sovereign debt. Such action would follow in the footsteps of the Federal Reserve, the Bank of England and the Bank of Japan.

Oil prices remained fragile after a savaging in the second half of 2014. American crude futures rose 20 cents to $53.46 a barrel, while Brent crude fell 13 cents to $57.20.

“Many of the themes that were in vogue heading into the end of the year remain very much firmly in place,” said Callum Henderson, an analyst with Standard Chartered Bank in Singapore. “The U.S. recovery is not stellar, but it’s certainly materially better than in most places in the G-10.”

Stock markets in Asia were relatively calm with China, Japan, Thailand and the Philippines closed for the holidays. Australia’s main index and South Korea’s both added 0.5 percent, and Hong Kong gained 1.1 percent.