The euro is heading for the biggest weekly drop in 3 weeks as bond yields fall

The euro is heading for the biggest weekly drop in 3 weeks as bond yields fall

The euro fell on Friday and headed for the biggest weekly drop in three weeks as a decline in government bond yields boosted pressure on global central banks to adopt new stimulus policies.

The yield on 10-year German government bonds fell below the ECB’s 0.40 percent interest rate, a level analysts say is a psychological barrier, although German short-term bond yields are already trading below that level.

But despite the sharp drop in yields, the single currency is well supported at around $ 1.12, the level it has been trading since early June, 1.5 percent above the $ 1.1055 low since late May.

On Friday, the single currency fell 0.1 percent to $ 1.1273 and headed towards a weekly loss of 0.8 percent against the dollar, the biggest weekly loss since mid-June.

The dollar index, which tracks the performance of the greenback against a basket of six major currencies, remained flat, with little change at 96.823, after the previous session was held in tight range as US financial markets were closed on public holidays.

The Australian dollar fell slightly to $ 0.7016 after rising to a two-month high of $ 0.7048 the previous day.

The Australian dollar has gained 1.4 percent since the start of the week, with expectations that the Federal Reserve and the European Central Bank will cut interest rates to shift some attention from the RBA to monetary easing.

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