Euro falls to 3-month low versus dollar

Euro bulls were left wondering whether the shared currency can regain its footing after falling to a 3-month low versus the dollar on Thursday.

The move came after the ECB announced it would cut its bond buying program from 60 billion euros ($69.9 billion) to €30 billion a month starting in January, while also extending the purchases, which had been due to end this December, until September.

The shared currency EURUSD, -0.2231% fell to an intraday low of $1.1641 and last traded at $1.1655. For the year, however, the euro remains up almost 11% against the U.S. currency. Meanwhile, the ICE U.S. Dollar Index DXY, +0.23% that measures the buck against six major currencies rallied 1% Thursday.

Bets on a rising euro remain a “super crowded trade, so I don’t think this move will just reverse again tomorrow,” argued Said Haidar, chief executive of macro hedge fund Haidar Capital Management.

The euro also weakened against the Japanese yen EURJPY, -0.22% falling 1.2% to a five-day low of ¥132.80, which is a similarly crowded trade like the euro-dollar pair, Haidar said.

That said, ECB President Mario Draghi delivered exactly what the doctor ordered, or rather, what analysts had expected: steady interest rates and details on the plans for bond purchases. “But the market was clearly looking for him to be more hawkish than he was,” said Adrian Helfert, multi-sector portfolio manager at Amundi Pioneer, so instead of focusing on the smaller monthly purchases, attention instead remained on the nine additional months of bond-buying.

“Monetary policy differentials are now the name of the game,” Helfert said. That favors the dollar, with the Federal Reserve on track to continue raising interest rates over the next several months while the ECB repeated its commitment to keeping interest rates at present levels for an “extended period” that it said would extend beyond the end of its net asset purchases. The ECB’s main lending rate stands at 0% versus a fed funds rate of 1% to 1.25%.

The Federal Reserve this month also began unwinding its more-than-$4 trillion balance sheet accumulated during its own program of asset purchases.

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