(Adds details, comments, updates prices)
By Vivianne Rodrigues
NEW YORK, Feb 7 (Reuters) - The euro declined broadly on
Thursday after European Central Bank President Jean-Claude
Trichet said euro zone growth risks are to the downside, paving
the way for lower interest rates this year.
Pressure on the euro started earlier in the session as the
ECB left benchmark borrowing costs unchanged at 4 percent.
Trichet made his comments in a post-meeting press conference.
The euro has come under pressure in the past couple of
sessions amid growing signs the economy in the 15-member bloc
is faltering. In another rate-setting meeting on Thursday, the
Bank of England cut borrowing costs, citing a weak economic
outlook.
"Trichet is basically giving us the green light to sell
some more euros as he talks about downside risks to growth,"
said Steven Butler, director of FX trading at Scotia Capital in
Toronto. "The market now thinks it's a matter of when, not if,
the ECB will be cutting rates."
In late morning in New York, the euro was down 0.8 percent
at $1.4501 <EUR=> after dropping as low as $1.4483. The euro
has lost almost 2 percent this week, heading for its biggest
weekly fall since June 2006.
The dollar also advanced against a basket of currencies
<.DXY>, gaining 0.6 percent to 76.631, its highest level in
about two weeks.
"We're at a bit of a pivot point in the euro here, and if
we can get and stay below the $1.4520 area I think that could
open the flood gates a little more," said Butler.
Versus the Japanese currency, the euro fell 0.7 percent to
154.43 yen <EURJPY=>.
Sterling fell to a two-week low at $1.9412 <GBP=> as the
Bank of England cut rates by a quarter percentage point to 5.25
percent, as expected, in a bid to head off a sharp consumer-led
slowdown, and signaled further gradual policy easing ahead.
In contrast to the United States, Canada and Britain, the
ECB has not yet gone down the path of cutting interest rates
because of price pressures in the 15 countries using the euro.
In January, euro-zone inflation hit a record high.
Recent signs of faltering growth in Spain, Italy and
elsewhere in the bloc, however, suggest the ECB may soon have
to switch its attention to supporting the euro zone economy.
"Although Trichet started out talking about inflation, he
quickly started talking about the downside to economic risk,"
said David Watt, senior currency strategist at RBC Capital
Markets in Toronto. "That was an open invitation to sell
euros."
Reports showing U.S. weekly jobless claims benefits fell
last week and that pending sales of previously owned homes slid
a steeper-than-expected 1.5 percent in December had little
impact.
The U.S. Federal Reserve has already slashed rates by 225
basis points and is seen cutting rates at least another 75
basis points by the end of the year.
Going into the weekend, investors may be looking to any
currency-related comments from the meeting of Group of Seven
finance ministers and central bankers in Tokyo.
A G7 source told Reuters the wording of this weekend's
communique is not yet finalized with regards to foreign
exchange but no change is expected from the text of the last
meeting in October.
(Additional reporting by Lucia Mutikani and Steven C. Johnson;
Editing by Leslie Adler)
