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Euro Hits 7-Month Low Against Dollar, Offshore Yuan Hits Record Low

by October 21, 2016 General

By Hiroyuki Kachi and Gregor Stuart Hunter
The euro fell to a seven-month low against the dollar Friday while the yuan hit a record low in offshore trading as overnight comments from European Central Bank chief Mario Draghi weakened the common currency and buoyed the greenback in Asia trade.Mr. Draghi signaled that the policy makers may extend their program of bond purchases beyond a scheduled end in March. He also brushed off a recent report that the central bank was considering trimming the size of its asset buying, providing an additional cue for euro selling.Around 0240 GMT, the common currency softened to $1.0896, its lowest level since March 11, compared with $1.0930 late Thursday in New York.Market players in Asia picked up the selling baton from the get-go, forcing the euro down further along with many other currencies in the Asia-Pacific region. Strong selling of the euro against the dollar–the world’s most heavily traded currency pair–helped give the U.S. unit broader strength.“The eurozone needs a weaker currency,” said SMBC Nikko FX strategist Makoto Noji, citing ECB chief Mario Draghi’s overnight comments that “risks to euro area growth outlook remain tilted to the downside and relate mainly to the external environment.”The euro is still higher than it should be because of the pound’s weakness, Noji added. The euro has gained nearly 30% against the pound from a year ago.“The ECB has a dire need to strengthen monetary easing, more so than the market consensus suggests,” said Mr. Noji.Robust U.S. company earnings may also have supported the dollar, given that U.S. corporate strength can limit the potential for U.S. stock falls should the Federal Reserve go ahead with an expected rate increase in December.The yuan hit a record low of 6.7646 against the U.S. dollar in offshore trading Friday with the dollar up 0.2%, last buying 6.7621 yuan. It touched a fresh six-year high against the onshore yuan.The yuan has been traded outside China since 2010.Hong Kong’s markets are closed today as a typhoon lashes the city. The yuan breached its previous record around 7.41 a.m. local time, during a sharp upward move when market liquidity was thin.While the yuan quickly regained ground, it gained fresh weakening impetus after the People’s Bank of China set its daily reference rate for the yuan traded in mainland China lower at 6.7558 against the U.S. dollar. Onshore, the yuan is allowed to trade 2% either side of this level. The currency last traded at 6.7519 against the greenback, while its offshore counterpart weakened further after the fixing.“Overnight we saw a broadly stronger U.S. dollar,” says Qi Gao, Asia foreign exchange strategist at Scotiabank. He anticipates further strength in the greenback in the weeks running up to the Fed’ December meeting.“Meanwhile, the People’s Bank of China is likely to step in to manage market expectations and prevent speculation of a sharp devaluation,” he added.The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.13% at 88.05.
Interbank Foreign Exchange Rates At 23:50 EST / 0350 GMT

Latest Previous %Chg Daily Daily %Chg
Dollar Rates Close High Low 12/31

USD/JPY Japan 104.15-16 103.95-96 +0.20 104.20 103.92 -13.42
EUR/USD Euro 1.0905-08 1.0928-31 -0.21 1.0932 1.0895 +0.42
GBP/USD U.K. 1.2238-40 1.2253-55 -0.12 1.2261 1.2229 -16.94
USD/CHF Switzerland 0.9950-54 0.9925-29 +0.25 0.9955 0.9921 -0.68
USD/CAD Canada 1.3243-48 1.3228-33 +0.11 1.3252 1.3226 -4.29
AUD/USD Australia 0.7625-29 0.7625-29 0.00 0.7637 0.7618 +4.67
NZD/USD New Zealand 0.7167-73 0.7191-97 -0.33 0.7196 0.7161 +4.93

Euro Rates

EUR/JPY Japan 113.56-60 113.59-63 -0.03 113.82 113.46 -13.16
EUR/GBP U.K. 0.8910-13 0.8919-22 -0.10 0.8930 0.8906 +20.89
EUR/CHF Switzerland 1.0850-53 1.0849-52 +0.01 1.0856 1.0843 -0.28

Other Dollar Rates

USD/CNY China 6.7528-48 6.7423-43 +0.16 6.7588 6.7428 +4.01
USD/HKD Hong Kong 7.7582-87 7.7580-85 +0.00 7.7595 7.7581 +0.10
USD/MYR Malaysia 4.1930-80 4.1780-830 +0.36 4.2007 4.1778 -2.50
USD/INR India 66.930-40 66.820-40 +0.16 66.935 66.843 +1.10
USD/IDR Indonesia 13028-42 13006-20 +0.17 13046 13010 -5.79
USD/PHP Philippines 48.290-330 48.091-111 +0.43 48.315 48.101 +3.10
USD/SGD Singapore 1.3935-45 1.3916-26 +0.14 1.3955 1.3910 -1.71
USD/KRW S. Korea 1134.95-6.95 1130.14-2.14 +0.43 1136.82 1129.50 -3.40

Source: Tullett Prebon
Write to Hiroyuki Kachi at