Euro near seven-month low

The US dollar rose to a seven-month high against the euro as speculation mounted that the European Central Bank is prepared to provide more monetary stimulus to revive inflation, diverging from the Federal Reserve’s plan to raise interest rates.

ECB President Mario Draghi has signalled more stimulus is in the wings – hinting at a near-certain move after its last meeting in October, invoking his predecessor Jean-Claude Trichet’s preferred signal for imminent action of being “vigilant”.

“Whatever it takes’ means exactly that. These conclusions point me toward a weaker euro”.

The euro traded at $1.0606, not far from Wednesday’s seven-month low of $1.0565.

“Lacking impetus from offshore markets and as our North American cousins continue to make inroads into the 46 million turkeys they typically consume each Thanksgiving, it promises to be a slow Asia-Pacific Friday”, said Ray Attrill, global co-head of FX strategy at National Australia Bank.

The euro has fallen 3.6% versus the dollar this month, just short of the 3.7% drop in the krone, which is pegged to the 19-nation shared currency. “If we conclude that the balance of risks to our medium-term price stability objective is skewed to the downside, we will act by using all the instruments available within our mandate”, Mr. Draghi said in his prepared remarks. With a slowdown in emerging markets and persistently low inflation testing the strength of the currency bloc’s recovery, the European Central Bank is debating whether to provide a new round of easing.

Meanwhile, the probability the Fed will increase its benchmark by its December 15-16 meeting is 74 percent, according to futures data compiled by Bloomberg. The Governing Council will make a decision on December 3.

The Australian dollar is trading at US72.48¢, compared with Wednesday’s local close of US72.72¢.

In corporate news, twelve of the biggest players in interest-rate swap trading, including BNP Paribas, Royal Bank of Scotland, UBS Group, Barclays Plc, Credit Suisse Group and Deutsche Bank were sued for allegedly limiting competition in the $320 trillion interest-rate swap market.

SMSF investors should retain their holdings in European and Asian equities, with equity markets expected to rally in these regions despite recent terrorism-related events, says Instreet Investment. That’s likely to strengthen the dollar as it will increase expected returns in the US.

European shares were set to follow suit, with financial spreadbetters expecting Britain’s FTSE 100 to fall 0.3 percent, France’s CAC40 to open down 0.4 percent, and Germany’s DAX to start the day 0.1 percent lower.