Euro drops sharply

The euro fell to one-month lows against the dollar and the yen on Tuesday as traders anticipated a deep interest rate cut by the European Central Bank this week.
In late morning trade here, the euro fell as low as 1.3222 dollars. It later stood at 1.3287 dollars, down from 1.3362 dollars in New York late on Monday.
Against the Japanese unit, the dollar dropped to 88.97 yen from 89.21 yen on Monday.
Traders were betting that the European Central Bank (ECB) will slash rates when it meets Thursday in an attempt to contain a deepening recession in the eurozone.
Markets generally expect a 50-basis-point cut from the ECB, said Shuichi Kanehira, vice president of forex at Mizuho Corporate Bank.
"But there is speculation for a larger reduction, keeping the euro weak," Kanehira told Dow Jones Newswires.
A cut of half-a-percentage point would take eurozone borrowing costs to 2.0 percent.
Lower interest rates tend to make a currency less attractive to investors but some analysts said the euro could also suffer if traders thought the ECB was not doing enough to ward off a severe recession.