Euro Falls to Six-Month Low Against the Dollar as Stark Resigns from ECB
The euro fell to a six-month low against the U.S. dollar on Friday after European Central Bank Executive Board member Jürgen Stark resigned from his position amid reports of an internal dispute over the central bank’s bond-buying program. The euro was already headed down yesterday after the ECB abandoned its stance on interest rates.
After raising interest rates in April and July, the ECB’s move to a more neutral monetary policy stance signaled slowing economic growth, which ECB President Jean-Claude Trichet said could come to a near standstill in 2012. “The market has been looking for an excuse to sell the euro and the U-turn in policy cycle direction signaled by the ECB may suffice,” said Marc Chandler at Brown Brothers Harriman.
The worsening situation in Greece is also weighing on the euro. With the Greek economy continued to contract at an alarming rate, the likelihood for a substantial default is ever increasing. “The situation in Greece remains dire and that suggests to us that confidence in the eurozone will remain very fragile indeed,” said Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ. “The euro will suffer over time.”
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The euro has fallen 1.2% against the dollar so far today, to $1.3719. It’s down 0.9% against the yen to Y106.71, and down 0.9% against the pound to £0.8629. Part of the reason the U.S. dollar has performed particularly well against the euro is its own simultaneous rise, supported by President Barack Obama’s announcement last night of a $447-billion plan to create jobs. Federal Reserve chairman Ben Bernanke’s speech earlier in the day Thursday also supported the dollar, as he made little mention of monetary policy plans, most notably avoiding the subject of quantitative easing, which would be a drag on the dollar.
The dollar rose 0.3% against the yen to Y77.76, rose 0.4% against the pound to $1.5902, and rose 1% against the Swiss Franc to SFr0.8834.