The euro is the world’s worst-performing major currency over the past month with traders bracing for the European Central Bank’s decision on whether to expand stimulus.
The single currency has depreciated almost 3 percent against the dollar since Feb. 10 as economists forecast the monetary authority on Thursday will probably cut its deposit rate from minus 0.3 percent and step up its 60 billion-euro ($66 billion) monthly bond-buying program. While speculators have recently added to bets that the euro will weaken, bearish positions are less than half what they were at the start of the year.
“The ECB is expected to ease, but if its options are in line with market consensus, the euro will be caught in the crossfire of selling and buying,” said Keisuke Hino, a foreign-exchange trader at Mizuho Bank Ltd. in New York. “The euro may simply fall if the ECB matches or exceeds market expectations, since speculative short positions aren’t big, unlike in December, when everybody was short.”
The euro was little changed at $1.0989 and 124.41 yen at 9:15 a.m. in Tokyo from Wednesday. The implied volatility of the single currency against the greenback over the coming week climbed to 18.2 percent, the highest since June 30.
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The euro jumped 3.1 percent on Dec. 3 after President Mario Draghi said the central bank would keep the pace of its monthly purchases steady and extend them to at least the end of March 2017. The ECB also broadened the range of assets eligible for purchase and cut the deposit rate by 10 basis points.
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