LONDON (AFP) — The euro weakened on Thursday against the dollar and yen as worries grew over Europe's economic health ahead of a widely-expected interest rate cut from the European Central Bank.
In late morning trade here, the euro eased to 1.3173 dollars, down from 1.3184 dollars in New York late on Wednesday.
Against the Japanese unit, the dollar dipped to 88.90 yen from 89.00 yen on Wednesday.
"The main market event today is the ECB's rate announcement at 1245 GMT, followed by (ECB President Jean-Claude) Trichet's press conference at 1330 GMT," said Calyon analyst Stuart Bennett.
The ECB is set to cut its main interest rate for the fourth time in a row amid hardening expectations of a deep recession in the 16-nation eurozone.
Most analysts expect the ECB's governing council to lower its benchmark interest rate by a half percentage point to 2.0 percent.
"With the economy in what appears to be a deteriorating recession... there appears little reason for the bank to hold off from slashing rates," added Bennett.
"The rhetoric flowing from ECB members since the last rate cut in December has appeared to err on the cautious side, indicating a desire to allow the previous 175 basis points of cuts to do their work before adding to them."
The ECB has already lowered borrowing costs by 175 points since October, but rates remain much higher than in the United States and Japan, where they are close to zero.
Dealers also digested news that credit ratings agency Standard & Poor's slashed its rating on Greece and warned of possible downgrades to Ireland, Portugal and Spain, said Hachijuni Bank forex strategist Masatsugu Miyata.
"The euro risks floundering further as it is very difficult to foretell economic prospects in Europe," he said.
The ratings news strengthened speculation that the ECB may be forced to lower its key lending rate by as much as 75 basis points, he said.
Elsewhere, Russia allowed the 16th effective devaluation of its currency in two months, pushing the ruble to a historic low against the dollar, the central bank said on Thursday.
Measured against its reference of a currency basket composed 55 percent of dollars and 45 percent of euros, it traded on Monday at 36.80 rubles compared to 35.80 rubles on Wednesday, RIA Novosti news agency reported.
An official at the central bank explained that the fall had been a result of the widening of the trading band which enabled the ruble to drop further.
Against the dollar, the ruble fell to 32.22 rubles, surpassing its previous record low of 31.88 rubles set in January 2003, Russian news agencies reported.
Russian authorities have vowed to ensure no sharp fall in the ruble against the background of an outflow of foreign capital and declining income from oil and gas exports.
In London trading, the euro changed hands at 1.3173 dollars against 1.3184 dollars late on Wednesday, at 116.88 yen (117.36), 0.9012 pounds (0.9022) and 1.4728 Swiss francs (1.4719).
The dollar stood at 88.90 yen (89.00) and 1.1208 Swiss francs (1.1159).
The pound was at 1.4591 dollars (1.4609).
On the London Bullion Market, the price of gold dropped to 811.29 dollars an ounce from 821.50 dollars late on Wednesday.
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