Euro loses ground on dollar

The euro fell versus the dollar at the beginning of the week as investors braced themselves for this week’s Federal Reserve policy meeting.

The market expects that the Fed will launch a fresh round of quantitative easing in order to prop up the faltering economy. However, despite the single currency’s losses, it remained near Friday’s four-month high which it climbed to after worse-than-anticipated US jobs data fuelled talks of further Fed stimulus.

The central bank is due to make an announcement on interest rates as well as issue a policy statement following Thursday’s Federal Open Market Committee meeting. Launching a new wave of quantitative easing would see the bank print money to purchase bonds, in turn depressing Treasury yields and encouraging investors to look for higher gains elsewhere. The greenback’s value falls when more money is added to the economy.

The euro fell by 0.2 per cent to $1.2787 on Monday, but remained close to $1.2817, the high it reached on Friday – its highest mark since May. The common currency has experienced rise in sentiment in the last few days of trading since the European Central Bank announced that it plans to reduced the borrowing costs for financially stricken countries such as Italy and Spain.