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| Euro drops against dollar as recession hits eurozone |
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Time is GMT + 8 hours
Posted: 14-Nov-2008 20:22 hrs |
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| A US dollar bill reflected in a euro coin. The euro fell against the dollar when the eurozone switched officially into recession and the market awaited an emergency multi-nation summit in Washington on the global financial crisis. |
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The euro fell against the dollar on Friday when the eurozone switched officially into recession and the market awaited an emergency multi-nation summit in Washington on the global financial crisis.. In morning trading here, the euro fell to 1.2677 dollars from 1.2779 dollars late in New York on Thursday.. The dollar dropped to 97.12 yen from 97.67 yen on Thursday.. "The latest eurozone GDP data confirm that the economy... entered its first technical recession since the formation of the euro" in 1999, said Capital Economics analyst Ben May.. "Coupled with the prospect of further sharp falls in inflation, this will prompt the ECB to cut interest rates aggressively over the coming months.". Traditionally, lower interest rates make a currency less attractive to investors even though they can help to boost economic growth.. The European Central Bank (ECB) last week cut its key lending rate by 0.50 percentage points to 3.25 percent.. ECB senior economist Juergen Stark on Friday underpinned expectations of further interest rate cuts to battle the effects of an economic recession.. "If our analysis allows for it, we do not rule out using this instrument again," Stark told a local radio station.. The economy of the 15 nations sharing the euro has slumped into recession for the first time ever, according to EU data released Friday, with gross domestic product (GDP) growth falling 0.2 percent in the second and third quarters.. Two consecutive quarters of falling GDP is the technical definition of recession.. Foreign exchange dealers said on Friday that the dollar could win a further boost against the euro should leaders of the world's 20 largest economies hammer out a coordinated fiscal stimulus plan at Saturday's emergency summit in Washington.. But for now, a raft of gloomy corporate news and economic data clouded over the greenback.. The US unemployment rate in October rose to 6.5 percent, its highest level since 1994.. Some 516,000 people in the United States newly reported last week that they lost their jobs, an unexpectedly high figure and the worst since the aftermath of the September 11, 2001 attacks.. Meanwhile both US imports and exports were down sharply in September, signalling growing weakness in the US and global economy despite a narrowing of the US trade deficit.. Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp, predicted more market turbulence should the Group of 20 summit achieve little.. "At the summit, each country will likely look inwards and discuss from the standpoint of protecting its own national interests. That means that a prescription to curb the financial crisis is unlikely to be drawn up," Uno said.. The euro changed hands at 1.2677 dollars against 1.2779 dollars late on Thursday, at 123.13 yen (124.84), 0.8557 pounds (0.8606) and 1.5099 Swiss francs (1.5166).. The dollar stood at 97.12 yen (97.67) and 1.1910 Swiss francs (1.1866).. The pound was at 1.4818 dollars (1.4842).. On the London Bullion Market, the price of gold rose to 728.73 dollars an ounce from 713.50 dollars late on Thursday. — AFP
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