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Euro weakens vs dollar as comments from ECB's Draghi weigh

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The euro fell against the dollar on Friday after two days of gains, pressured by comments from European Central Bank chief Mario Draghi who expressed willingness to add more stimulus to the euro zone economy to raise inflation.

Most major banks have stuck firmly to the view that the euro will fall toward parity with the dollar in the months ahead as the Federal Reserve begins to lift interest rates while the ECB takes the opposite course.

The euro, which earlier slipped back below $1.07 against the dollar, was down nearly three percent so far in November, on pace for its worst month performance since March.

Draghi on Friday suggested that the ECB would do whatever it takes to raise inflation as fast as possible, and pointed to the benefits of a cut in deposit rates to aid an expansion of its quantitative easing program of bond-buying.


"The comments support expectations of additional, possibly aggressive, stimulus at the (ECB's) December policy meeting," said Shaun Osborne, chief currency strategist, at Scotiabank in Toronto.

The euro fell 0.69 percent against the dollar to $1.0649, and was down 0.69 percent versus the yen at 130.86 yen.

The dollar, meanwhile, slipped 0.02 percent against the yen to 122.87 yen, but was up 0.44 percent versus the Swiss franc at 1.0185 francs.

Speculation among market participants of intervention by the Swiss National Bank intensified this week, weakening the Swiss currency. The euro slid 0.2 percent against the franc to 1.0848 francs.


Overall, there are some question marks over the dollar's ability to rise in the sort of sustained fashion seen at the end of 2014.

For the short term, the options market has substantial barriers in place around $1.06, preventing the euro from falling further. On the other hand, some investors may simply not have the appetite to put yet more money on the table just as the year is closing.

"It's hard not to say that you're bullish on the U.S. dollar," said Ken Lambden, senior investment manager at Barings Asset Management in London said at the Reuters summit this week.

"But we don't think U.S. growth is as strong as it looks. So there is a case to say you could get some strength out of the euro on the back of an improving economic performance next year."