Euro Falls Against Dollar; Trichet Doesn’t Rule Out Rate Cuts

By Anchalee Worrachate

Jan. 15 (Bloomberg) -- The euro declined against the dollar after European Central Bank President Jean-Claude Trichet signaled policy makers aren’t finished cutting interest rates in an effort to counter the economic slump.

The 16-nation currency weakened as the Frankfurt-based ECB lowered the main refinancing rate today by 50 basis points to 2 percent. The ECB lowered its key interest rate by 2.25 percentage points since October as the global financial crisis pushed the region’s economy into a recession. The euro briefly reversed declines after Trichet said the bank’s next key meeting will be in March, signaling it may leave rates unchanged in February.

“Any rebound in the euro is likely to be short-lived,” said Neil Jones, head of hedge fund sales at Mizuho Corporate Bank in London. “ The ECB will eventually come round to the market’s way of thinking. They will become more sympathetic with the growth story.”

The euro dropped to $1.316 as of 2:28 p.m. in London, from $1.3191 yesterday. Against the yen, the common currency slid to 117.66, from 117.46. The dollar was at 89.38 yen, from 89.05.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net;