Euro exchange rate falls on ECB doubts

The euro dropped for the third day in a row on Friday, falling further back from recent highs as investors began to doubt the ability of the European Central Bank to solve the debt crisis and offloaded the currency.

Currencies like the Australian dollar also lost ground after weaker-than-anticipated trade data from China increased slowdown fears. However, losses were limited in China on expectations that recent data could lead to additional monetary stimulus.

Expectations that the ECB will launch measures to reduce beleaguered Italy and Spain’s borrowing costs drove the euro to a one-month peak versus the dollar earlier in the week; however, since then the optimism has started to cool and led to some investors opting to sell.

The single currency fell by 0.3 per cent to $1.2270, dropping back from its one-month peak of $1.2444 hit on Monday. It remains on course for the first weekly loss it has seen for three weeks.

Weak economic data from the euro zone has also impacted the common currency in the past few days. Earlier on Friday, the German economy ministry announced that the country’s economy is likely to have to contend with considerable risk because of the ongoing crisis in the region.