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Euro plunges to two-year low after ECB chief's latest stimulus remarks

Euro plunges to two-year low after ECB chief's latest stimulus remarks
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The euro has fallen in value to its lowest in two years against the dollar.

At one stage it dipped just below $1.27, and was also down against the pound and the Japanese yen.

That follows remarks from European Central Bank President Mario Draghi.

In an interview with Lithuanian business newspaper Verslo Zinios, Draghi repeated that the ECB stands ready to do more to support the economic recovery and head off deflation should it become necessary.

Draghi talked about using “additional unconventional instruments” seen by investors as a reference to quantitative easing – or money printing.

Draghi’s remarks followed on the heels of comments on Wednesday when he said the ECB would keep monetary policy loose – that is interest rates low – for as long as it took to push ultra-low inflation back up towards the 2.0 percent level.

Market scepticism is growing over whether the ECB’s latest offer of four-year loans at ultra-cheap rates to banks in exchange for lending will work.

That was illustrated by the fact that lending to eurozone households and companies contracted for the 28th month in a row in August, though at a slower pace.

In August, loans to the private sector continued to fall, down 1.5 percent from the same month a year earlier after a contraction of 1.6 percent in July, ECB data showed on Thursday. Private sector loans have not grown since April 2012.