Euro slips to fresh 12-year low on dollar

[TOKYO] The euro fell to another 12-year low against the dollar on Monday, hit by the European Central Bank's huge stimulus programme, while investors await the Federal Reserve's policy meeting this week.

In early Tokyo trading, the euro briefly dropped to US$1.0451 - its lowest since January 2003 and down from US$1.0489 in New York on Friday - before recovering to US$1.0515 by midday.

It rose to 127.60 yen from 127.38 yen in US trade.

The dollar, which has been soaring on expectations of a mid-year US interest rate hike, slipped back to 121.35 yen from 121.44 yen.

"In the market's mind, there is only one event really worth watching this week: Thursday's FOMC (Federal Open Market Committee) decision...with attendant press conference," National Australia Bank said in a commentary.

"Anticipation is high. Investors have put their blinkers on, focused almost exclusively on whether the word 'patient' is removed from the policy statement."

The US central bank's choice of words is seen as key to figuring out when it will lift rates, which is widely expected by June although policymakers have said they are in no rush to meet a specific timeline.

Mixed data, including an upbeat jobs report and weaker-than-expected US retail sales, have stoked uncertainty over the strength of a recovery in the world's top economy, a key marker for a Fed rate move.

The dollar's ascent against a range of currencies comes as the Fed considers tightening policy just as its counterparts, including the ECB and Bank of Japan, embark of further stimulus.

"The Fed has never found itself on the other side of global policy and this central bank divergence is making the dollar the most sought-after currency on the planet," Evan Lucas, a markets strategist in Melbourne at IG Ltd, wrote in a client note, according to Bloomberg News.

With the ECB launching starting its monetary easing programme last week, and the Fed expected to lift rates, analysts tip the greenback to hit parity with the euro by next year. The last time the pair were equal was in 2002.

Investors are also keeping an eye on a BoJ meeting that wraps up on Tuesday, although few expect it to announce fresh measures until later this year.

AFP