German yield at record low, euro sinks as Draghi rekindles policy easing bets


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    LONDON, June 18 (Reuters) - The euro dropped and German
government bond yields hit a new record low on Tuesday after
European Central Bank chief Mario Draghi said the bank will
provide more stimulus if inflation doesn't pick up. 
    The euro zone's central bank will need to ease policy again,
possibly through new rate cuts or asset purchases, if inflation
doesn't head back to its target, Draghi told the ECB's annual
conference in Sintra, Portugal.*:nECBSINTRA
    Germany's 10-year government bond yield  DE10YT=RR , the
benchmark for the bloc, dropped to a new record low of minus
0.274% after the remarks, while other euro zone bond yields were
lower by 3-5 basis points.  NL10YT=RR   FR10YT=RR 
    "The very fact that some ECB board members are considering
rate cuts should be seen as a wake-up call," said Marc-André
Fongern, a strategist at MAF Global Forex in Frankfurt.
    "Given the multitude of risks to the economy, this signifies
a fundamental change in communication."
    The euro  EUR=EBS  weakened across the board after ECB's
Draghi comments. It erased earlier gains against the dollar and
dived to a 1-1/2 week low versus the perceived safe-haven Swiss
franc  EURCHF= . 
    The main euro zone stocks index  .STOXXE  trimmed early
losses as the euro fell. It was trading down just 0.1% by 0812
GMT as the fall in the single currency translated into a boost
for euro zone exporters.

 (Reporting by the London Markets Team; Writing by Abhinav
Ramnarayan; Editing by Saikat Chatterjee and Catherine Evans)
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