FX Roundup: Euro tumbles on Draghi comments, rouble hits record low

The euro headed lower on Thursday after European Central Bank President Mario Draghi said monetary policy might be reviewed in March, while the Russian rouble hit another record low in wake of the oil price slump.

In a press conference following the ECB's decision to keep key rates unchanged, Draghi hinted at policy action over the coming months to help push inflation back towards the target of just below 2%.

At 1635 GMT, the euro was down 0.56% against the dollar exchanging at $1.0829. Continuing with major crosses, the pound was also marginally lower by 0.07% exchanging at $1.4182 per barrel, while the greenback rose 0.72% and 0.62% versus the Swiss franc and yen, exchanging at CHF1.0115 and JPY117.660 respectively.

Jane Foley, senior FX strategist at Rabobank, said, “Along with the yen, the euro is one of the few G10 currencies to have outperformed the dollar (albeit modestly) in the year to date.

"On balance, we see risk of a 10 bps discount rate cut in March. Although we see scope for EUR/USD to edge lower this year, we expect the pace and scale of any downside to be moderate. We forecast EUR/USD at 1.06 on a six-month view.

Meanwhile, major commodity linked currencies continued to grab attention as oil headed above $28 per barrel mark, an improvement on the previous session but still close to lows last seen in November 2003.

The Russian rouble dropped to a fresh record low against the dollar. Overnight, a dollar was fetching RUR 82.4, before another 3% decline in the Russian currency saw the exchange rate revised to RUR 85.0. However, a spokesperson for the Russian government said the situation was not “critical.”

“The rate is changing, the rate is volatile, but it is far from a collapse," he added. Earlier, frosty relations between Russia and the West deteriorated further, after a UK inquiry found that the fatal poisoning of Russian dissident Alexander Litvinenko in London in 2006 was “probably approved” by President Vladimir Putin.

However, Moscow rebuffed the accusation describing the British inquiry as "biased and politically motivated."

On Tuesday, the International Monetary Fund predicted that Russia's economy would contract by 1% in 2016, following a 3.7% decline in 2015. The IMF expects a return to growth in 2017.

In the Americas, the dollar rose against the Brazilian real (up 1.08%) but fell 0.26% and 1.59% against the Mexican peso and Canadian dollar respectively.

Simon Smith, chief economist at FXPro, said, “The Canadian dollar at least got a break overnight; the first day of appreciation versus the dollar in 13 trading sessions as the Bank of Canada kept rates on hold. Its down by more than 4% so far this year.

“The central bank was relatively upbeat on the economy, all things considered, which allowed short-dated bond yields to rise on the reduced prospect of easing later this year. But many in the market do not share BoC’s optimism, especially as the oil price continues to travel south.

Finally, the Australian dollar rose 0.80% against its US counterpart exchanging at US$0.6943. The New Zealand dollar also rose 0.70% exchanging at US$0.6475.