CABLE 1.6930 GBPEUR 1.2229 EUR 1.3840
The euro was set to fall for the first week in three after European Central Bank President Draghi said policy makers may ease in June. The yen headed for its strongest weekly advance against the dollar in a month. The single
currency has weakened against most of its major peers since May 2, with Draghi saying yesterday the 24-member Governing Council was “comfortable with acting next time.
Australia’s dollar was weaker after the nation’s central bank said loose monetary policy would be appropriate for some time yet. The pound was poised for its longest stretch of weekly gains since September 2012 amid signs the U.K.’s economic recovery is gaining traction. Draghi seems to have succeeded in raising market expectations for additional easing, weakening the euro. I expect the euro to stay soft until the June meeting.
The euro traded at $1.3840 at 1:02 p.m. in Tokyo, set for a 0.2 percent weekly loss. It yesterday touched $1.3993, the strongest level since Oct. 31, 2011. The 18-nation currency was little changed at 140.74 yen and has weakened 0.7 percent since May 2. The yen was at 101.70 per dollar, little changed from yesterday and 0.5 percent higher than last week. The pound fetched $1.6926, and has risen 0.3 percent since May 2, poised for a fifth weekly advance.
The common currency dropped yesterday versus all its 16 major counterparts except Denmark’s krone as Draghi’s comments in Brussels raised the prospect of additional stimulus. We want to see the staff projections that will come out in the early June, Draghi said after the ECB kept its benchmark rate at a record-low 0.25 percent yesterday, as predicted by 56 of 58 economists surveyed. There wasn’t a decision today. It’s a preview of the discussion we will have next month. A stronger euro in the context of low inflation is cause for serious concern, Draghi said.
The euro gained 5.4 percent in the past 12 months, the third-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 1.3 percent and the yen weakened 2.5 percent. The pound was the biggest gainer, rising 9.2 percent. Australia’s dollar was the worst performer, with a 9.2 percent loss. The yen rallied this week after 10-year Treasury yields touched a three-month low of 2.57 percent on May 5, reducing the allure of US debt for Japanese investors. U.S. yields are near the low end of the range they’ve been in since January, and if they break below that there’s scope for a larger drop.
