The euro fell to a two-month low versus the dollar as the European Central Bank kept its benchmark interest rate at a record low and President Mario Draghi said economic growth was expected to remain “weak.”
The single currency declined against all except two of its 16 major counterparts after Market News International said the ECB was reluctant to start buying government bonds after a decline in borrowing costs. The yen advanced as investors sought safer assets amid concern re-elected U.S. President Barack Obama will struggle to avert the so-called fiscal cliff. The pound rose against the euro as the Bank of England refrained from boosting its asset-purchase program.
“The ECB decision not to cut cannot be a great surprise to the market, but perhaps some were flirting with the idea of an easing especially after Draghi’s comments yesterday,” said Daragh Maher, a currency strategist at HSBC Holdings Plc in London. “I suspect the market will be patient and hope the press conference gives us something more exciting, perhaps on Spain or Greece.”
The euro dropped 0.1 percent to $1.2754 at 8:58 a.m. in New York after sliding to $1.2717, the lowest level since Sept. 7. The common currency fell 0.3 percent to 101.83 yen after sliding 0.8 percent yesterday. The yen strengthened 0.2 percent to 79.86 per dollar.
Europe’s central bank left its benchmark interest rate at 0.75 percent at its policy meeting in Frankfurt today, as forecast by all except one of 63 economists surveyed by Bloomberg News.
“Economic activity in the euro area is expected to remain weak,” Draghi said at a press conference following the decision. “The necessary process of balance sheet adjustment and high uncertainty continue to weigh on the economic outlook.”
The euro dropped in earlier trading as Market News reported the ECB was satisfied with the tranquilizing effect created by its plan to buy government bonds, citing unidentified European Union and central-bank officials. The common currency rallied in August and September amid speculation ECB bond purchases would cap borrowing costs for nations such as Spain and Italy and help contain the debt crisis.
German exports, adjusted for work days and seasonal changes, dropped 2.5 percent from August, when they gained 2.3 percent, the Federal Statistics Office said today. That’s the biggest slide since December. Economists surveyed by Bloomberg forecast a 1.5 percent decline.