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Euro slumps to 9-year low on ECB QE expectations

Euro slumps to 9-year low on ECB QE expectations
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The euro continues to slide in value. It was down for a fifth day on Thursday, at a nine-year low against the dollar.

The slump comes as investors dump euros believing that the European Central Bank is about to start quantitative easing (QE) to stimulate the eurozone economy and ward off deflation.

That would pump cash into the economy and comes against a background of weak growth in the currency bloc, a drop in consumer inflation and concern about the destablising effects of the Greek general election on January 25.

The ECB could announce it is to start a QE programme to buy government bonds as early as at its policy meeting on January 22.

The dollar is getting a boost on expectations the Federal Reserve will raise interest rates in the United States this year, although the timing remains unclear.

Minutes of the December meeting offered no new clues, although most expect the Fed to act around mid-year.

“The Fed hinted that in its view the financial markets have not been pricing enough tightening, meaning that risks are balanced towards a hawkish surprise,” said Petr Krpata, currency strategist at ING. “All in all, the Fed bias is clearly dollar supportive.”