Euro falls vs dollar after ECB official's hawkish remark

[NEW YORK] The euro weakened against the dollar on Thursday after a senior policymaker at the European Central Bank said inflation was missing its target, raising speculation of more stimulus for the eurozone.

The euro fell 0.8 per cent against the US currency, trading at US$1.1376 around 2100 GMT, down from US$1.1469 at the same time Wednesday.

ECB board member Ewald Nowotny said eurozone inflation was undershooting the central bank's target, as prices were pushed lower by sharp falls in oil and other commodity prices.

"One has to say that these are elements the central bank cannot influence, but also core inflation rates are clearly below our target," the Austrian economist said, quoted by the Bloomberg news agency.

With eurozone inflation falling to negative 0.1 per cent in September, the outlook was fanning market speculation that the ECB may strengthen its massive bond-buying programme.

"Nowotny's comments differ from the recent 'wait and see' mantra coming from several ECB policymakers, including President Mario Draghi, regarding the need for more stimulative action," Howard Archer, IHS Global Insight chief UK and Europe economist, said in a report.

"Nowotny's comments will certainly spice up interest in next Thursday's ECB policy meeting," he added.

The dollar, meanwhile, found some support from US labour and inflation data that support an earlier rate rise by the Federal Reserve.

New claims for US unemployment insurance benefits fell to a 42-year low last week and core consumer prices in September that strip out food and energy showed greater strength than expected.

"Low jobless claims and robust core inflation data should help to bolster the Fed's confidence that it is getting ever closer to meet both of its mandates," said Harm Bandholz of UniCredit Economics.

"We continue to expect the first rate hike for December."

AFP