By Candice Zachariahs
Nov. 6 (Bloomberg) -- A dip in the euro if there is an ``unprecedented'' 1 percentage point interest-rate cut by the European Central Bank would be a buying opportunity as the currency may rally toward $1.33, Citigroup Inc. said.
The ECB will reduce its benchmark rate by 1 percentage point to 2.75 percent when it meets today, said Citigroup, the only institution among 55 surveyed by Bloomberg News to estimate a cut of that size. The remaining 54 economists forecast a 0.5 percentage point reduction.
``A move of this magnitude would be unprecedented from the ECB, which has never moved more than 50 basis points in one step,'' wrote New York-based Tom Fitzpatrick and Todd Elmer and London-based Michael Hart and Michael Rosborough, analysts at Citigroup, in a research note dated Nov. 5. ``We believe that an aggressive rate cut is unlikely to mark a sustained decline in the euro and, tactically, an intraday dip should represent an attractive buying opportunity.''
The euro fell for the second day against the dollar, declining 0.7 percent to $1.2867 at 1:41 p.m. in Tokyo from $1.2954 yesterday. The euro would strengthen on a 0.5 percentage point cut, while a 1 percentage point cut would initially drive the currency lower, wrote the analysts.
The euro may also be ``ripe for a bounce'' in the short-term to test $1.33, the Citigroup analysts said, citing technical charts.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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