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Euro drops to post eurozone crisis low
From the Financial Times of Tue, 23 Dec 2014 18:02:47 GMT

The euro fell to its lowest level since the eurozone crisis of 2012 in thin trading at the end of the year as Greece failed to elect a new president in its second round of voting.

The single currency fell 0.3 per cent against the dollar to $1.2180, its weakest level since Mario Draghi, president of the European Central Bank, promised to do “whatever it takes” to save the euro at the height of the crisis more than two years ago.

If Greece’s coalition government fails to elect its presidential candidate in a third round of voting next week, a general election would be triggered at which investors fear the anti-bailout Syriza party could come to power, creating fresh instability for the single currency bloc.

The euro has come under increasing pressure in recent weeks amid signs the European Central Bank is likely to embark on full-blown quantitative easing early next year to help boost the ailing eurozone economy. Many currency analysts believe the full effect of any QE programme is still not priced into the value of the euro.

Further strength in the dollar also helped push the euro down, as a final estimate of US economic growth showed a 5 per cent annual rise in the third quarter, its fastest expansion in more than a decade.

“The euro’s drop to new lows is likely a reflection of the combination of both the strong dollar outlook and the increasing risk of quantitative easing from the ECB; as well as increasing political risk from Greece coupled with year-end positioning. Currently, fundamentals, technicals and flow all support a weaker euro,” said Camilla Sutton, a currency strategist at Scotiabank.

“The strong US GDP print will put additional pressure on the Fed to move away from its zero interest rate policy and enter its hiking cycle, further supporting the dollar,” she added.

The dollar index, which weighs the US currency against its main trading counterparts, rose more than 0.2 per cent to trade above 90 for the first time in more than eight years.

The pound fell 0.6 per cent against the dollar to trade below $1.55 — its weakest level in 16 months — after the UK’s Office of National Statistics revised down previous estimates of economic growth, making it unlikely the UK will hit the government’s 3 per cent forecast of economic growth in 2014.

The dollar rose 0.5 per cent against the yen to trade above Y120 while the euro was 0.3 per cent higher against sterling at £0.7868.

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