The euro has reached a nine-year low against the US dollar as investors predicted the European Central Bank (ECB) may act to stimulate the economy.
The European currency fell by 1.2% against the dollar to $1.1864, marking its weakest level since March 2006, before recovering slightly to $1.19370.
The drop follows ECB president Mario Draghi’s comments indicating the bank could soon start quantitative easing (QE).
Greek political turmoil also weighed on the currency.
Although the ECB has already cut interest rates to a record low level, and also bought some bonds issued by private companies, a full-scale program of QE has not yet been launched.
On January 2, Mario Draghi hinted in a newspaper interview that the ECB might soon start a policy of QE by buying government bonds, thus copying its counterparts in the UK and US.
The purpose would be to inject cash into the banking system, stimulate the economy and push prices higher.
In an interview with German newspaper Handelsblatt, Mario Draghi said: “We are making technical preparations to alter the size, pace and composition of our measures in early 2015.”
Political turmoil in Greece also weighed on the euro, with fears that the general election on January 25, could see the anti-austerity, left-wing Syriza party take control of the country.
The possibility has sparked fears about whether Greece will stick to the terms of its international bailout and stay in the eurozone.
On January 3, German magazine Der Spiegel magazine said Germany believes the eurozone would be able to cope with a Greek “exit” from the euro, if the Syriza party wins the Greek election.
Reacting to the Der Speigel report, a spokesman for German Chancellor Angela Merkel said there was no change in German policy and the government expects Greece to fulfill its obligations under the EU, ECB and IMF bailout.
France’s President Francois Hollande also commented, saying it was now “up to the Greeks” to decide whether to remain a part of the single currency.
“Europe cannot continue to be identified by austerity,” Francois Hollande added, suggesting that the eurozone needs to focus more on growth than reducing its deficit.
Analysts said the euro was likely to remain volatile for the next few weeks.
Kweku Adoboli, the suspected UBS rogue trader said today that he was “sorry beyond words” for the record $2.3 billion losses suffered by Swiss banking giant.
Kweku Adoboli sat in the dock at City of London magistrates’ court as his barrister Patrick Gibbs QC told the court:
“He is sorry beyond words for what has happened here.
“He went to UBS and told them what he had done and he stands now appalled at the scale of the consequences of his disastrous miscalculations.”
Kweku Adoboli will face a second count of fraud in addition to two charges of false accounting over three years at UBS
Kweku Adoboli, 31, will face a second count of fraud in addition to two charges of false accounting over three years at UBS.
Magistrates remanded Kweku Adoboli in custody until October 20 at the first of two committal hearings.
Prosecutors allege Adoboli lost the cash while working at UBS’s global synthetic equities division, buying and selling exchange traded funds, which track different types of stocks, bonds or commodities such as metals.
Kweku Adoboli’s lawyer, Louise Hodges, of solicitors Kingsley Napley, has made no application so far for bail for her client.
The alleged fraud offence took place between January 1 and September 14 this year.
Kweku Adoboli, son of a former Ghanaian official to the United Nations, joined the Swiss firm in a junior capacity in 2002.
The fraud charge against the rogue trader reads:
“While occupying a position, namely being a senior trader with Global Synthetic Equities, in which you were expected to safeguard, or not to act against, the financial interests of UBS Bank, you dishonestly abused that position intending thereby to make a gain for yourself, causing losses to UBS or to expose UBS to risk of loss.”
The two accusations of false accounting claim that Kweku Adoboli “falsified a record, namely an exchange traded fund transaction”
The two accusations of false accounting – which date back to 2008 – claim that Kweku Adoboli “falsified a record, namely an exchange traded fund transaction”.
After Kweku Adoboli’s first appearance in court, UBS revised upwards the cost of the rogue trading to 2.3 billion US dollars (£1.5 billion) after previously saying the incident had cost it in the range of two billion US dollars (£1.3 billion).
British Financial Services Authority and its Swiss counterpart have launched an investigation into why UBS failed to spot allegedly fraudulent trading.
Kweku Adoboli is the suspected rogue trader who was arrested in London at early hours today on suspicion of losing $2 billion of UBS, the major investment Swiss bank group.
Ghanaian Kweku Adoboli, 31, was detained on suspicion of committing fraud while working at Swiss bank UBS, after police raided his home at 3.30am.
After the raid UBS shares fell by 8%, as the bank warned that the unauthorized trading could tip the firm into a third-quarter loss.
Kweku Adoboli, the rogue trader arrested in London for $2 bn UBS losses (Facebook image)
UBS CEO, Oswald Gruebel sent a memo to UBS staff yesterday that the rogue deals had been discovered within the past 24 hours.
Gruebel told staff:
“We regret to inform you that yesterday we uncovered a case of unauthorised trading by a trader in the Investment Bank. We have reported it to the markets in line with regulatory disclosure obligations.
“The matter is still being investigated, but we currently estimate the loss on the trades to be around 2 billion US dollars.”
Oswald Gruebel vowed to “establish exactly what has happened” and underscored that “no client positions were affected”.
The UBS CEO urged staff to remain focused on their clients as the investigation continues.
“We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank’s management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened. We will keep you updated on the progress of our investigation.”
Trader Kweku Adoboli worked at the UBS’ headquarters in the very heart of London’s finance district.
UBS has around 65,000 employees worldwide, but it said the bank has recently reduced its staff by 3,500 as part of a bid to save $2.3 billion by the end of 2013.
The cuts came as it said pre-tax profits dropped 23% on the previous quarter to $2 billion at the end of June.
As well as the economic downturn, UBS said regulatory changes such as the Basel rules, which require the bank to hold more capital, were behind the need for the cost reductions.
Despite being one of the biggest wealth managers in the world, UBS has a chequered recent history.
In 2008, UBS was rescued by the Swiss state following huge losses on toxic assets held by its investment bank.
The bank then became embroiled in a serious tax evasion dispute with US authorities and was forced to hand over 300 client names and pay a $780 million fine. There was then a second case in which bank agreed to hand over data on 4,450 American clients.
A restructuring then saw UBS launch a multi-million dollars advertising campaign which used the slogan ‘we will not rest’.
UBS Investment Bank’s offices in Stamford, Connecticut boasts the largest trading floor in the world – it is the size of two American football pitches, and sees more than $1 trillion in assets traded every day.