Bloomberg News

Euro Stays Higher After ECB Keeps Benchmark Rate at Record Low

June 06, 2012

The euro stayed higher against the dollar after the European Central Bank left its benchmark rate at a record-low 1 percent.

The 17-nation currency also stayed stronger versus the yen. Forty-nine of 60 economists surveyed by Bloomberg forecast no change, 10 predicted a 25-basis-point cut, and one expected a 50-basis-point reduction. Central bank President Mario Draghi will hold a news conference to explain the decision on 2:30 p.m. Frankfurt time.

“Economic conditions have deteriorated significantly since their last meeting and downside risks to inflation have increased, so they’re clearly going to be more dovish today,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said before the decision was announced.

The euro traded 0.4 percent stronger at $1.2501 at 12:48p.m. London time after falling to $1.2288 on June 1, the weakest since July 2010. Europe’s shared currency was 0.9 percent higher at 98.98 yen. The dollar gained 0.5 percent to 79.15 yen.

The shared currency declined 0.1 percent when the ECB kept its benchmark rate unchanged at its previous meeting on May 3. It weakened 0.5 percent against the dollar on Dec. 8 when the ECB cut its benchmark to 1 percent and announced a program of three-year loans to banks.

The ECB said on June 4 it didn’t settle any government-bond purchases for a 12th week. It began the program in May 2010 as part of measures to support Europe’s higher-yielding debt.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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