Euro suffers as ECB introduces further stimulus

Published: 5 Sep at 6 AM Tags: Euro, Dollar,

The euro has experienced heavy losses as the European Central Bank introduced more monetary stimulus and promised to provide more if needed. The single currency dopped 1.6 per cent against the dollar, the most it has fallen since November 2011. The ECB has announced to will slash interest rates and buy covered bonds and asset-backed securities.

Leader of the central bank Mario Draghi has not yet confirmed the size of the asset purchases but indications are that he will increase the balance sheet to levels last seen in 2012. This would be a fifty per cent increase, or 1 trillion euros, up on current levels.

The euro is currently worth $1.2920, the lowest it has been against its US rival in 14 months. The common currency is at a one-month low against the yen at 135.97 and a 15-month low of A$137.98.

Sovereign bonds and equities across the eurozone have rallied. This means two-year yields in France, The Netherlands, Germany and Austria are now in negative territory. Although the euro hit a two-year dip against the Swiss franc of 1.2045, the currency has managed to recover to 1.2064.

Data released by the US on Thursday indicates that the country is continuing on the road to recovery.