Euro weakens, sold in favor of higher-yielding currencies

June 11, 2014

Frankfurt (June 11)  The euro fell 0.1 percent to $1.3535, nearing a four-month low of $1.3503 set last Thursday soon after the ECB cut interest rates to record lows. It was also down 0.1 percent against the British pound at 80.75 pence, close to an 18-month low of 80.64 pence struck on Tuesday.

The euro set a near seven-month low against the Australian dollar on Wednesday. It was last down 0.25 percent at A$1.4420 . Against the New Zealand dollar, the euro last fetched NZ$1.5834, having shed 1.3 percent this week.

~~The single currency has also been pegged back by the European Central Bank cutting interest rates last week, including imposing a negative rate on excess cash deposited with it, and other measures to ward off disinflation.

That has pushed down euro zone money market rates, eroding the euro's yield allure, and leading some investors to use it as a funding currency - one borrowed cheaply to buy a higher-yielding unit.

~~The euro hovered near a four-month low versus the dollar and a 1-1/2 year trough against sterling on Wednesday, with the single currency under pressure due to a widening yield gap between euro zone bonds and their major peers.

A rise in U.S. yields on speculation that the U.S. Federal Reserve could raise interest rates sooner than previously expected has supported the dollar and put pressure on the euro this week.

Source: CNBC



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