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Currencies: Euro slips amid further QE speculation

The euro is still close to a nine-year low

LONDON (MarketWatch) — The euro slumped and traded close to a nine-year low against the dollar on Monday after a report that the European Central Bank is moving closer to announcing a full-scale quantitative-easing program.

The shared currency EURUSD, -0.32%  exchanged hands at $ 1.1817, down from $ 1.1839 late Friday. Last Thursday, the euro dropped to a low of $ 1.175, the lowest since December 2005.

The euro has shaven off 5.2% over the past three months, as a sluggish recovery and worryingly low inflation have raised expectations that the ECB will go all out on monetary easing and start to buy sovereign bonds. CNBC reported on Monday that the central bank is planning to design such a bond-buying program based on how much a national bank has paid to the ECB every year. This would then determine how much the ECB would buy of that country’s government bonds, CNBC said, citing a source close to the central bank.

The report comes ahead of the ECB meeting on Jan. 22, when economists are increasingly expecting the bank to announce a full-blown QE program after the latest consumer-price data showed the eurozone is now battling with negative inflation.

In other currencies, the ICE dollar index DXY, +0.52% a measure of the greenback’s strength against a trade-weighted basket of six rival currencies, traded at 92.10, compared with 91.9450 on Friday, when the gauge fell by 0.46%. The loss came after the U.S. jobs report for December showed hourly wage growth contracted last month, causing investors to delay their expectations for when the Federal Reserve will begin raising its benchmark interest rate.

Against the yen, the dollar USDJPY, +0.45% rose to ¥118.97 from ¥118.50 late Friday.

The pound GBPUSD, -0.07%  fell to $ 1.5112 from $ 1.5159.

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