The euro headed south on Monday as traders bet that the European Central Bank will open up the monetary stimulus taps, while key US jobs data were also in focus.
A solid reading for the employment figures on Friday would likely add to already strong expectations that the Federal Reserve will go ahead with raising near-zero interest rates.
As policymakers from the US central bank get ready for a rate hike, the ECB appears set to move in the opposite direction with extra stimulus to boost growth in the struggling eurozone economy.
The measures could be unveiled as early as Thursday when it holds its latest policy meeting.
“After last week’s doldrums, this week’s agenda will come as a shock to the system,” Raiko Shareef, currency strategist at the Bank of New Zealand, said in an email to clients.
“Front of mind will be the ECB’s policy decision. The US employment reports will garner interest, but only a disastrous result would likely derail the (Fed policy board) from raising rates next month.”
The euro weakened to $1.0584 in Tokyo on Monday from $1.0595 Friday in New York, fuelling speculation it could fall toward parity with the US unit for the first time since 2002.
The 19-nation single currency also eased to 129.90 yen from 130.14 yen in US trade.
“Euro selling will see its climax going into the ECB meeting, with a knee-jerk reaction to the outcome possibly sending it to new lows for the year close to $1.03,” Daisuke Karakama, chief market economist at Mizuho Bank, told Bloomberg News.
“The euro will likely see its trough in January-March but chances will grow for its rebound as expectations for US rate hikes will be more moderate next year.”
Meanwhile, the International Monetary Fund is expected to approve inclusion of China’s yuan in a basket of elite currencies on Monday.
The agreement would realise a long-held goal for Beijing of giving its currency international status, alongside the dollar, euro, pound and yen.
In other trading, the dollar edged down against the yen, dropping to 122.73 yen in Tokyo from 122.85 yen Friday in US trade.
However, the US unit rose against a string of emerging market currencies ahead of the key jobs data, gaining 0.34 percent against the South Korean won, 0.26 percent against Indonesia’s rupiah and 0.20 percent against the Malaysian ringgit.
It also advanced against the Taiwan dollar.