Investing.com -- The euro slipped below 1.05 against the U.S.
dollar on Friday, as concerns mounted for European importers that
EUR/USD could reached parity sooner than expected.
In U.S. afternoon trading, the euro fell 1.32% or 0.014 to
1.0497 to reach a 12-year low. The euro dropped steadily from
session-highs of 1.0636 in European trading to cap a volatile week
for the currency.
The euro has depreciated more than 10% against its U.S.
counterpart for the year and nearly 40% since August. More than a
third of the yearly decline has occurred over the last week, as
investors geared up for the start of the European Central Bank's
€60 billion a month quantitative easing program, which began on
In quantitative easing, policy makers purchase securities with
the newly printed currencies to raise the money supply in the wider
system. Monetary easing programs, such as the ones previously
undertaken by central banks in the U.S. and Japan following the
2008 Financial Crisis, are intended to drive up the market price of
bonds. When bond prices increase, yields decrease lowering the
rates for mortgages and other loans.
One week into the initiative, the bond buying program appears on
its way of accomplishing its intended effect. Yields on 10-year
government bonds are down across the board in Germany, France,
Spain, Italy and Belgium. On Friday, however, the German 10-Year
bunds edged up 4.03% to 0.01, after reaching record-lows last
Questions, though, remain on whether the European Central Bank
can attract enough buyers to snatch up the sovereign debt. Over the
first three days of quantitative easing, the ECB made €10.3 billion
in bond purchases, according to the Wall Street Journal. In
addition, Norway's oil fund announced on Friday that it will sell
$860 million in European bonds from its portfolio to invest in real
The U.S. dollar continued its upward path against its major
global competitors. The U.S. Dollar Index, which measures the
greenback versus a basket of six major currencies, cracked the
historic 100 barrier underscoring the strength of the dollar. By
late-afternoon, the index peaked at 100.37 to reach a level not
seen since 2003.
Currency traders now await next week's critical Federal Open
Market Committee meetings when the U.S. Federal Reserve could
provide indications on how shortly it might raise interest rates.
If the Fed decides to remove a reference to "remaining patient," in
its minutes, it typically indicates that interest rates could be
raised at either of its next two meetings. After next week's
meeting, the FOMC will meet in June and September.
Additional gains in the dollar were softened on Friday by weaker
than expected U.S. economic data. The U.S. Labor Department said in
a monthly report that producer prices in February declined by 0.5%,
following a drop of nearly 1% a month earlier.
Elsewhere, the University of Michigan's Consumer Sentiment Index
fell sharply to 91.2 in March from a 95.4 level last month. The
index was expected to rise slightly to 95.5.
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