Euro falls to lowest level since 2010

The euro fell to its lowest level in four and a half years versus the dollar on Friday, after the head of the European Central Bank fanned expectations it would take bolder steps on stimulus this month.

The euro fell to $1.2035 on trading platform EBS, its lowest level since June 2010, and last traded at $1.2042, down 0.5 per cent on the day.

In an interview with German financial daily Handelsblatt, ECB President Mario Draghi said the risk of the central bank not fulfilling its mandate of preserving price stability is higher now than half a year ago, underlining its readiness to act early this year should it become necessary.

The ECB council meets on January 22nf and markets are wagering heavily it will finally decide to start buying sovereign debt, following in the footstep of the US, UK and Japan.

Oil was also active on Friday as prices tried to rally on news of a larger-than-expected fall in US crude inventory and a fire at a major US supply facility. Yet the mood was fragile after last year’s savaging and sharp early gains were soon pared. US crude futures added 54 cents to $53.81 a barrel, while Brent rose just 17 cents to $57.50. Stock markets in Asia were calmer with China, Japan, Thailand and the Philippines all on holiday. Australia’s main index and South Korea’s both added 0.5 per cent and Hong Kong 0.8 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed, having ended 2014 almost exactly where it began - a pattern it has repeated for three years straight. Economic data from the region was generally subdued, with China on Thursday reporting its official Purchasing Managers’ Index (PMI) slipped to 50.1 in December, the lowest level of 2014 and barely in expansion territory, from November’s 50.3. The blow from sputtering factory activity was softened by a rise in the service sector PMI to 54.1, a hopeful sign that services are taking over from manufacturing as a driver of economic growth.

In any case, investors are focused on the likelihood that Beijing will roll out more stimulus to avert a sharper slowdown which could trigger job losses and debt defaults. That was one reason Chinese stocks outpaced the rest of the world to end 2014 with an increase of 52 per cent. Wall Street also managed double-digit gains.

While the S&P 500 ended Wednesday with a loss of 1.03 per cent it was still 11 per cent higher for the year. The Dow eased 0.89 per cent on Wednesday, while the Nasdaq dipped 0.87 per cent. On Friday, S&P 500 EMINI futures were showing a rise of 0.5 per cent, as were Dow futures.

Gold looked set to post its third straight weekly loss at $1,184.25 an ounce, weighed down by a strong dollar. It ended 2014 down about 2 percent.

Reuters