Euro struggles ahead of rate decision

The euro extended recent losses against other leading currencies on Monday as traders anticipated a hefty interest rate cut by the European Central Bank later this week. In late morning trading here, the euro fell to 1.2667 dollars from 1.2695 dollars late in New York on Friday. Against the Japanese currency, the dollar dropped to 94.17 yen from 95.44 yen on Friday. "This week's schedule is dominated by the next round of rate decisions -- specifically the next round of monetary easing," said Calyon analysts in a note to clients. The euro last week lost ground after official data showed that 12-month inflation in the 15-country eurozone sharply fell in November. The decline set the stage for a steep cut in interest rates by the European Central Bank on Thursday, dealers said. It would be the third interest rate cut in less than two months by the ECB. There is speculation that this week's cut could be bigger than the 50 basis point reduction seen in early November that disappointed markets. The British, Australian and New Zealand central banks are also expected to lower official borrowing costs this week to tackle economic downturns. "We expect to see aggressive policy easing in all cases," Standard Chartered analysts predicted. "This presents downside risks to all these currencies against the dollar this week." The dollar slipped against the yen ahead of key US employment data slated for release on Friday, although traders noted the pair were stuck in a narrow trading range. Expectations have mounted that the US Federal Reserve will also cut interest rates at its meeting later this month. The Bank of Japan meanwhile is considering new measures to make it easier for companies to gain access to credit in the run-up to the end of the fiscal year to March, central bank governor Masaaki Shirakawa said. Local media reported that the steps could be adopted at an extraordinary meeting this week. In London trade on Monday, the euro changed hands at 1.2667 dollars against 1.2695 dollars late on Friday, at 119.33 yen (121.19), 0.8375 pounds (0.8255) and 1.5323 Swiss francs (1.5408). The dollar stood at 94.17 yen (95.44) and 1.2096 Swiss francs (1.2131). The pound was at 1.5133 dollars (1.5367). On the London Bullion Market, the price of gold fell to 804.18 dollars an ounce from 814.50 dollars late on Friday.