Euro Slips on Draghi's Comments

  on May 07 2013 8:38 AM
Euro Symbol building 2
The euro currency sign is seen in front of the European Central Bank headquarters in Frankfurt. Reuters

The euro lost some ground on Tuesday morning after Mario Draghi reiterated the central bank's commitment to further easing on Monday. The common currency fell to $1.3052 overnight and steadied at $1.3088 in the early hours of Tuesday.

At Thursday's European Central Bank meeting, Draghi and the region's finance ministers agreed to slash interest rates by 0.25 percent, bringing the bank's rate to 0.5 percent. The move put pressure on the euro, but since it was widely expected, it came as no surprise to the markets.

At the press conference following the meeting, Draghi remarked that the bank was ready to lower deposit rates, and would consider doing so at the next meeting in June. The prospect of negative deposit rates shocked investors and drove the euro downward as many feared the effects of such a decision.

As the dust settled following the meeting, the euro bounced back after Draghi's peers assured investors that lowering the deposit rate was only one of several options for further easing. However, CNBC reported that Draghi reiterated his intent to lower deposit rates on Monday during a speech in Rome.

Many are taking the speech as Draghi's attempt to knock the euro down a bit. With the US and Japanese central banks aggressively committed to monetary stimulus, the dollar and yen have weakened, making eurozone exports more expensive.

Adding to the region's woes, the International Monetary Fund stirred the pot on Monday after it revisited whether or not eurozone government will need to forgive some of their bailout loans to Greece. After its latest review of Greece's bailout program, the IMF found that the nation's debt is still far too high and urged eurozone members to consider taking losses on their contributions to the bailout.

Although the bloc's finance ministers agreed to reopen the debate over this issue at a meeting last November, forgiving debt has been vehemently opposed by several members, most notably Germany.

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