The largest ETF pegged to the euro fell to the lowest level in over two years Thursday as the currency dropped below the key $1.22 mark.
CurrencyShares Euro Trust (FXE) is down nearly 8% the past three months on the intensifying Eurozone debt crisis.
The euro fell under $1.22 for the first time in two years. FXE has trended to the downside in the wake of the recent European Central Bank rate cut. [Euro ETF Tests 52-Week Low After ECB Slashes Rates]
Meanwhile, the dollar has strengthened on the safe-haven trade in currency markets and speculation the Federal Reserve won’t engage in additional quantitative easing following the release of the latest Fed minutes.
“Every single central bank except for the Fed is easing, and until that happens we expect the dollar to stay supported,” said George Saravelos, currency strategist at Deutsche Bank, in a Reuters report. “The euro is likely to weaken further as it will be hurt by the ECB’s decision to cut the deposit rate and there will be a shift in funding.”
PowerShares DB US Dollar Index Bullish (UUP) rose to a fresh 52-week high on Thursday to over $23 a share.
“With the weakening euro, the U.S. dollar tracked by UUP is poised for a breakout to the upside,” Street One Financial said in a research note. “Near term strength has once again put the ETF right near $23 where it will meet some resistance at a recent high. A break through this level and we may see more upside to 2$4 and perhaps challenge 2010 levels of $25.75.”
Elsewhere in currency ETFs, CurrencyShares Japanese Yen Trust (FXY) traded higher Thursday after the Bank of Japan stood pat on interest rates.
CurrencyShares Euro Trust
PowerShares DB US Dollar Index Bullish