An exchange traded fund pegged to the euro’s movements versus the U.S. dollar fell nearly 2% Thursday after the European Central Bank slashed a key interest rate to a record low.
The ECB cut the main refinancing rate by a quarter point to 0.75% and also lowered the overnight deposit rate to zero.
“The benchmark rate doesn’t really matter at the moment, but cutting the deposit rate all the way to zero takes the ECB into new territory,” said James Nixon, chief European economist at Societe Generale, in a Bloomberg News report. “If you can kick-start the money market you go a long way to addressing some of the funding problems that banks face. That may free banks to lend to the economy.”
CurrencyShares Euro Trust (NYSEArca: FXE) was down 1.7% in midday dealings Thursday after the ECB moves. The euro ETF is trading near its 52-week low of $122.75 a share.
ProShares Short Euro (NYSEArca: EUFX), a new ETF that bets against the euro, rose nearly 2%. [Short Euro ETF]