FOREX-Euro falls versus dollar, yen on ECB rate cut hope

Thu Dec 6, 2012 8:14pm IST

* ECB holds rates at 0.75 percent, cuts inflation, growth
outlook
    * ECB President Draghi says wide discussion on rates
    * Political tensions on Italy grows

    By Wanfeng Zhou
    NEW YORK, Dec 5 (Reuters) - The euro fell against the dollar
and yen on Thursday after comments from the head of the European
Central Bank and a downgrade to the region's growth and
inflation forecasts boosted expectations of an interest rate
cut.
    Political tension in Italy added to pressure on the euro.
Italian Prime Minister Mario Monti on Thursday faced a revolt by
Silvio Berlusconi's PDL party, which ratcheted up tension ahead
of an election early next year by walking out of a Senate
confidence vote. 
    ECB President Mario Draghi, speaking at a press conference
after the bank's decision to keep its main interest rate at 0.75
percent, said there was a wide discussion on interest rates, but
the consensus was to leave the rates unchanged.
    "The euro is slumping against both dollar and yen and we
attribute this to Draghi's comments that there was a wide range
of discussion over what to do with interest rates today," said
Andrew Wilkinson, chief economic strategist at Miller Tabak &
Co. LLC. in New York.
    "That comment suggests that there was a body of support for
easing monetary policy and so the market is looking to the next
meeting as perhaps a time to seek a cut."
    Draghi also said policymakers discussed negative deposit
rates, but he did not elaborate further. 
    The ECB also lowered its growth and inflation forecast and
said that risks to growth remain on the downside.
    "The combination of the ECB's cooler growth and inflation
forecasts opened the door to a rate cut in the months ahead,"
said Joe Manimbo, senior market analyst at Western Union
Business Solutions in Washington.
    The euro fell as low as $1.3021 on Reuters data and
was last down 0.3 percent to $1.3033. It also lost 0.4 percent
to 107.33 yen.
    The dollar slipped 0.2 percent to 82.35 yen.
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