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The euro slides further south on bets the European Central Bank is about to take further steps to support the euro zone economy.

Last week the ECB Governor, Mario Draghi, stated the central bank was ready to take action with all tools at its disposal if inflation continued to decline. Draghi also confirmed that in addition to targeted longer-term refinancing operations, and the purchase of asset-backed securities, the ECB was ready for further measures if needed.

The euro slumped to one-year low on Tuesday, as the possibility of the European Central Bank expanding liquidity in the euro zone as early as next week was discounted in the common currency’s exchange rate.

European indices gained sharply on Monday amid expectations for further policy accommodation. The British FTSE gained 0.5 percent in catch-up trade today, following a MondayUK market holiday.

The market mood was supported by the S&P 500, which briefly topped the 2,000 mark on a several occasions this week. The latter is an all-time high for the US benchmark.

The heftiest gains on Wall Street were made by financial shares. Investors judged that the latter would be the major beneficiary of ECB cheap liquidity, while the US Federal Reserve is getting ready to end bond-buying.

Influenced by speculation on ECB purchasing euro zone countries debt, bond yieldsofcountries like Germany, France, Spain, Italy, Portugal and Irelandslumped to all-time lows. The interest of German 10-year paper, at 0.926 percent, marked a record low, to rise back to 0.95 percent shortly afterwards.

Expectations are for ECB to release information on its monetary policy path next month. The actual security purchases are anticipated to commence in October.

The euro declined in early Asian trade, to $1.31785, the lowest since early Septemberlast year; the test of the $1.30 supportis regarded as inevitable by analysts.

The German Ifo business climate index, releasedyesterday,indicated sagging of business confidence for fourth month in a row. This in turn gave a further boost to expectations for ECB asset purchases.

The USD stayed firm, with the dollar index hitting a one-year high at 82.613. The greenback eased a bit against the yen, to 103.90, but still the USD/JPY remained in proximity of its seven-month peak, 104.49.

In this realm of broad US dollar strength, the New Zealand dollar went down to a six-month low, $0.8311, impacted by the surprisingly large New Zealand trade deficit.