Euro struggles near 18-mth lows on weak EU outlook

WELLINGTON (BestGrowthStock) – The euro touched an 18-month low on Monday, as investors dumped the single currency on mounting fears that recent belt-tightening measures would hurt an already fragile growth in the euro zone area.

The euro had plunged to its lowest level against the dollar on Friday since late October 2008 with losses deepening after European Central Bank policymaker Axel Weber saying that it was important not to underestimate lingering dangers to financial stability.

The euro ranged between $1.2340 and $1.2369 in early Asia Pacific trade compared with Friday’s late level around $1.2360.

Traders say sentiment toward the euro is bearish and if the single currency breaks below $1.2329, it will the lowest in four-year. Charts suggest that the next target for the euro is the 2005 low at $1.1640.

Last week the currency briefly rallied toward $1.31 after the European Union and International Monetary Fund pledged up to $1 trillion in aid to euro zone countries that get into financial trouble, before worries about the euro zone’s growth outlook came back into focus.

An analyst said the euro looked to have further to fall given the relative weakness of the EU’s growth outlook compared with the U.S.

“This suggests EUR/USD should be trading below, or at least closer to, its long-run fair-value, which we estimate at around $1.2100,” said Bank of New Zealand currency strategist Mike Jones.

So far this month the euro has fallen more than 7 percent against the U.S. dollar, and is nearly 14 percent lower for the year, making it the worst-performing major currency.

Data released Friday showed speculative bets against the euro hit a record high in the week to May 11.

The euro was also lower against other major currencies slipping briefly below 114 yen before lifting to settle around 114.06. Sterling was also softer at $1.4522 from Friday’s $1.4557.

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(Reporting by Gyles Beckford; Editing by Anirban Nag)

Euro struggles near 18-mth lows on weak EU outlook