By Josie Cox
The euro teetered on the edge of an 11-year low against the U.S.
dollar Wednesday, on the eve of a key meeting at which the European
Central Bank is expected to shed more light on how it will execute
the bumper bond-buying program it announced in January.
The bloc's single currency was trading around half a percentage
point lower against the dollar midmorning at around $1.1125. A drop
under $1.1098 would mark the euro's lowest point since September
2003. The euro also hit a seven-year low against sterling
Wednesday, at GBP0.7253.
"It ultimately comes down to the fact that we have one central
bank that is aggressively easing and one that looks like it will
hike rates and that's what's driving the move," said Peter
Kinsella, a currency strategist at Commerzbank in London,
referencing expectations that the U.S. Federal Reserve will start
raising rates this year.
The specific driver for Wednesday's move, he said, is likely a
U.S. jobs report due later in the session, which is expected to be
robust.
"I can't imagine that anyone would want to buy the euro ahead of
the ADP employment report," he said.
Over the longer term, Peter Dragicevich, a currency strategist
at Commonwealth Bank of Australia, said he also expects the trend
to continue. "Barring a sharp and unanticipated faltering in the
U.S. economy, we expect the euro [against the dollar] to remain
heavy," he said.
The euro has now fallen 8% against the buck this year and it has
dropped by almost 14% over the past six months. ICE's US Dollar
Index, which measures the dollar's strength against a basket of
other currencies, rose to yet another 11-year high Wednesday
morning.
The euro's persistent weakness comes despite figures showing
that retail sales in the eurozone rose for the fourth straight
month in January and at the fastest rate in more than nine
years
European stock markets were mixed. Having opened around 0.3%
higher, the Stoxx Europe 600 sagged into the red after the
eurozone's composite Purchasing Managers Index for February was
revised lower from a previous reading, indicating that
private-sector activity expanded at a slower pace than first
estimated.
Germany's DAX 30 and France's CAC 40, which had both opened the
session stronger, were trading 0.2% lower and 0.2% higher,
respectively. London's FTSE was 0.3% lower.
Back in currency markets, India's rupee briefly rose to a
one-month high against the dollar in earlier trade after the
country's central bank surprised markets with a cut to its key
lending rate for the second time this year.
It trimmed its main repurchase rate by 0.25 percentage points to
7.5%, citing weakness in parts of the economy as well as favorable
inflation figures and structural overhauls included in the
government's proposed budget.
Indian stocks traded slightly higher Wednesday morning after the
Reserve Bank of India move and the rupee's rise proved
temporary.
Market participants said the central bank was buying U.S.
dollars and selling rupees after the rate move, to keep the rupee
from strengthening too sharply.
In commodity markets, Brent crude was 0.7% lower at around
$60.60 a barrel. Gold rose 0.1% to $1,205.10 a troy ounce.
Write to Josie Cox at josie.cox@wsj.com
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