US dollar slips against the euro

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IOL world currency1 Graphic: Renjith Krishnan.

New York - The dollar slipped against the euro Monday despite bearish comments from Europe and amid expectations that the Federal Reserve will keep policy on course in its two-day meeting opening Tuesday.

The euro-dollar rate remained within its recent narrow range, showing little impact from a fresh round of sanctions announced by the US and the European Union against Russia, aiming to press Moscow to stop menacing Ukraine.

The trade also seemed unperturbed by warnings from France's central bank that the eurozone faces a disinflation threat, and from the Bundesbank that the German economy will see a “noticeable” slowdown this quarter.

“Low inflation does not mean deflation,” said Bank of France Governor Christian Noyer.

But he underscored that very low inflation was a big problem, and part of the cause was the euro's strength.

The big challenge for the 18-nation eurozone was “the risk of inflation which is too weak for a lasting period,” he said.

No policy surprises are expected from the Fed in its monetary policy review on Tuesday and Wednesday: another $10 billion cut to bond purchases is presumed, as is an unchanged dovish stance on inflation.

The yen meanwhile fell against the euro and the dollar, ahead of a Bank of Japan policy meeting on Wednesday.

With Japan's inflation number appearing stronger last week, the BoJ could be reticent to further ease policy. - Sapa-AFP

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