The euro fell against the dollar on Thursday as investors cautiously awaited the European Central Bank's April policy meeting, set to take place later in the day.
The common currency traded at $1.3763 at 8:10 GMT as speculation that the bank will not ease at this month's meeting grew.
Despite recent comments from the bloc's finance ministers about the need to control the region's inflation rate, most analysts are not expecting the bank to make any major policy changes.
The International Monetary Fund spoke out on Wednesday, urging the ECB to step in this month and combat the risk of deflation. Eurozone inflation slipped to 0.5 percent in March, far below the bank's target of two percent and dangerously low to falling below zero. The IMF warned that if the ECB does not work to increase the bloc's inflation, the region's already fragile recovery could soon fall apart.
Over the past few days, several bank officials commented that the bank was considering using a negative deposit rate to inject funds into the bloc's financial system. A negative deposit rate would effectively charge banks for holding on to cash and could spur on lending. Another option would be an asset purchase program similar to that in the US.
In any case, the euro is likely to fall in both the near term and the long term. Reuters reported that a poll of more than 60 foreign exchange strategists showed that most expect that the euro will be trading at $1.37 in April, $1.33 in the next six months and below $1.30 in a year.
If the bank does decide to ease further at today's meeting, there will likely be a large reaction and the common currency will head towards $1.36.
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- European Central Bank
- International Monetary Fund