ECB will signal further rate cuts

The euro fell, snapping two days of gains versus the yen, on speculation the European Central Bank will cut interest rates today and signal further reductions in borrowing costs to counter the region’s deepening recession.

The euro also headed for a fourth weekly loss versus the dollar before a report from the European Union’s statistics office that economists say will reiterate the region’s economy shrank the most in at least 13 years last quarter. The yen traded near the weakest in four months against the dollar after a government report showed Japanese companies slashed spending at the fastest pace in a decade.

ECB President Jean-Claude Trichet may say he’ll cut rates again in the future. This would likely cause selling of the euro.

The euro declined to $1.2603 Tokyo from $1.2661 late in New York yesterday. The European currency dropped to 125.16 yen from 125.52. The yen traded at 99.31 versus the dollar from 99.15 yesterday when it touched 99.49 yesterday, the weakest level since Nov. 10. The U.S. currency was at $1.4145 per pound from $1.4194, and advanced to 1.1726 Swiss francs from 1.1676.

The ECB will cut its 2 percent target lending rate by a half-percentage point to the lowest level since the 16-nation currency was introduced in 1999. The Bank of England will halve its main rate to 0.5 percent at a separate meeting today