Euro tumbles to lowest in over 11 years as ECB meeting looms

The euro wallowed at its lowest in over 11 years against the greenback early on Thursday, having suffered a big setback as investors waited for the European Central Bank to announce more details of its massive bond-buying program. -- PHOTO: BLOOMBERG
The euro wallowed at its lowest in over 11 years against the greenback early on Thursday, having suffered a big setback as investors waited for the European Central Bank to announce more details of its massive bond-buying program. -- PHOTO: BLOOMBERG

SYDNEY (Reuters) - The euro wallowed at its lowest in over 11 years against the greenback early on Thursday, having suffered a big setback as investors waited for the European Central Bank to announce more details of its massive bond-buying programme.

The euro zone common currency fell as far as US$1.1061, a low not seen since September 2003, surpassing the previous trough of US$1.1098 set on Jan 26. It was last at US$1.1084.

It also slid to a one-month low of 132.40 yen and came within a whisker of a seven-year trough against sterling. The euro last traded at 72.56 pence, not far off the low near 72.35 set earlier in the week.

"There was little fundamental news to explain the weakness in the euro over the past 24 hours, but downward pressure remains and the break of some key technical support areas has provoked further selling," said Mr Brian Martin, strategist at ANZ. "Our short-term target for EUR/USD has now been achieved and a break below 1.10 would open the way for a move towards 1.05."

The ECB, which starts its quantitative easing (QE), or bond-buying, programme worth more than 1 trillion euros this month, is expected to detail the plan later in the day following its policy meeting.

Investors have already driven yields across Europe to record lows in anticipation of the ECB's largesse, greatly widening the yield advantage of the US dollar in the process.

"One aspect that has drawn market concern in particular is whether the ECB will be able to source 60 billion euros of assets per month," analysts at BNP Paribas wrote in a note to clients. "We expect Draghi to reassure the markets on that front as any wavering on the total amount would be very damaging for the credibility of QE."

Renewed weakness in the euro helped drive the dollar index to a fresh 11-year high of 96.059. The dollar, however, was little changed on the yen at 119.68 yen.

It also failed to gain much traction against the Australian dollar, which held its ground above 78 US cents.

In the near term, local retail sales data due at 0030 GMT will determine the fate of the Aussie, which this week staged a rally after the Reserve Bank of Australia surprised some by not cutting interest rates.

The Bank of Canada, though, surprised no one when it too held rates steady overnight. The bank said the current level of stimulus is "still appropriate", echoing language used last week by BOC governor Stephen Poloz.

The Canadian dollar firmed slightly to C$1.2407 per USD but stayed well within a 1.2350/1.2700 range seen in the past month.