London, May 10 (Bloomberg) -- The euro, which has fallen 6 percent against the dollarthis year, was little changed amid expectations the European Central Bank will leaveits key interest rate on hold today in an effort to fight inflation. All but one of the 38 economists and investors surveyed by Bloomberg News expectthe ECB's rate-setting panel to keep its main refinancing rate at 4.75 percent when itmeets today. The bank will announce its decision at 12:45 p.m. London time. ``There's no change in the pipeline,'' said Simon Rubinsohn, who helps oversee about23 billion pounds ($33 billion) as chief economist at Gerrard Ltd. ``The ECB must beconcerned about what's going on'' in the euro region's economy, though it's unlikely tocut its key rate until June 7 at the earliest because of persistent inflation, he said. The euro was trading at 88.66 U.S. cents, compared with 88.44 late yesterday.Against the yen, it was at 108.27 yen per euro, compared with 108.07. The euro hasfallen 24 percent against the dollar and 18 percent against the yen since its January1999 debut. Currency traders have been looking favorably on interest-rate cuts as they boost theprospects for equity markets and economic growth. With the likelihood of a further 50basis-point rate cut from the Federal Reserve next week, a refusal by the ECB to movemay push the euro lower, investors said.
Persistent Inflation
The ECB has kept borrowing costs unchanged since October as inflation held aboveits 2 percent ceiling for 10 months. The central bank has resisted calls from policymakers and investors to lower its key rate amid growing signs that a global economicslowdown is weighing on the 12 economies in the region. The euro yesterday fell to its lowest level since April 19 after a report showed Germanindustrial production posted the biggest drop in more than six years in March. It wasthe third time this week that an indicator for the region's largest economy fell belowexpectations. Unemployment rose for a fourth month in April and factories posted thebiggest decline in orders in almost a decade in March. ``Recent data suggests the euro zone is beginning to get some of the fallout from theU.S.,'' said Stuart Kinnersley, chief investment officer at Nikko Global AssetManagement, where he helps manage more than $4 billion. ``If inflation is sticky,they'll be less inclined'' to cut rates this year, he said. The yen was little changed against the dollar amid concerns about whether newJapanese Prime Minister Junichiro Koizumi will be able to implement policies tobolster the world's second- biggest economy. The Japanese currency, which has tumbled 10.33 percent against the dollar in thepast year, was trading at 122.15 yen per dollar, compared with 122.23 late yesterday. ``It's far from clear that Koizumi will be able to drive through his reforms,'' saidRubinsohn at Gerrard. ``The market is concerned by the uncertainty,'' which may pushthe yen below 130 per dollar in coming months, he said. Still, Rubinsohn said he was optimistic about the Japan's economic prospects ``overtime'' and Gerrard has ``marginally increased its exposure'' to the currency as a result.