Exchange Rate 'Volatility' Is 'Source of Uncertainty': Draghi

Jan 28, 2018, 00:35
Exchange Rate 'Volatility' Is 'Source of Uncertainty': Draghi

The dollar was sent lower by comments from USA treasury secretary Steve Mnuchin at Davos, who suggested that a weaker dollar is "good for us as it relates to trade and opportunities".

"If you take the overall stance of the USA administration, it's protectionist and still it's not clear what kind of dollar the president and the Treasury want", said Vassili Serebriakov, FX strategist at Credit Agricole in NY.

The euro was around 0.8% higher against the USA dollar as at 1410 GMT.

Draghi also said that recent swings in the euro exchange rate with the dollar — mostly up in the past few days — were "a potential source of instability" that required "monitoring".

More news: 55 percent of Americans say Trump's mental fitness is a legitimate question

In his comments on Thursday, Draghi cited the repeated joint statements by worldwide finance officials in which they commit to refrain from lowering their currencies' exchange rates to gain trade advantage at the expense of other countries. Draghi noted that the exchange rate wasn't a policy goal for the European Central Bank but had to be considered in its deliberations about what to do about inflation.

The pace of growth in lending to businesses in the eurozone slowed in December, European Central Bank data showed Friday, in a mild setback for the Frankfurt institution. Official comments can however have an impact.

However, the euro has continued to make gains against the U.S. dollar as continued strength in eurozone domestic economic data has prompted speculation that the European Central Bank could adopt a more hawkish stance this year.

The ECB made a decision to keep interest rates in the eurozone on hold, with the focus now on ECB president Mario Draghi's usual press conference following the release of the statement on rates.

More news: Nine killed in massive fire in Delhi warehouse

The purchases, already twice reduced, are set to run until the end of September and investors are betting on their end in the fourth quarter.

Credit to businesses grew by 2.9 percent year-on-year last month, adjusting for some purely financial transactions, a drop of 0.2 percentage points compared with the figure for November.

But that progress was stopped later in the day as Trump sought to play down the speech by the USA treasury secretary by saying that the dollar was bound to get stronger due to the strong economic data.

Part of his holding pattern approach, Draghi also kept the bank's guidance unchanged, maintaining a promise to continue asset buys until a sustained rebound in inflation, even after policymakers agreed in December to begin work in early 2018 to draft a new guidance.

More news: Tebow Invited To The NY Mets Spring Training

YOU MIGHT ALSO LIKE
popular