The euro strengthened versus the yen after European Central Bank President Mario Draghi said policy makers didn’t discuss cutting interest rates at their meeting this week.
The 17-nation currency fluctuated against the dollar after Draghi said at a press conference in Barcelona there has been “significant progress” on the fiscal front. Higher-yielding currencies, including Mexico’s peso, declined versus the greenback as stocks and commodities fell amid lower appetite for risk. The dollar pared gains versus the yen after a gauge of U.S. service industries fell more than forecast.
“The ECB was somewhat less dovish than some had expected,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “We saw the euro push up on that. Some market participants were looking for a hint of additional liquidity intervention, and we didn’t get that.”
The euro gained 0.1 percent to 105.59 yen at 1:58 p.m. in New York after dropping to 105.13 yesterday, the weakest level since April 16. It rose earlier today as much as 0.6 percent. The single currency was little changed at $1.3146 after falling earlier as much as 0.5 percent. The yen fell 0.2 percent to 80.32 per dollar, paring an earlier drop of 0.5 percent.
The Standard & Poor’s 500 Index (SPX) retreated 0.8 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials dropped 0.8 percent.
Mexico’s peso weakened 0.6 percent to 13.0089 to the greenback, and Australia’s dollar lost 0.8 percent to $1.0249.
The ECB kept its main refinancing rate at a record low 1 percent, as predicted by all 58 economists surveyed by Bloomberg News. While the ECB still expects a gradual economic recovery this year, “downside risks” prevail and the outlook has become “more uncertain,” Draghi said.
“The market was looking for something on potential interest-rate cuts,” said Neil Jones, head of European hedge- fund sales at Mizuho Corporate Bank Ltd. in London. “We got nothing, so the euro is rallying as a result.”
The euro fell earlier today as Spanish borrowing costs increased at a note sale. Spain auctioned 765 million euros of notes due in January 2017 at an average yield of 4.75 percent, versus 3.57 percent at a previous sale of five-year securities on Feb. 2. It auctioned three-year debt at an average rate of 4.037 percent, compared with 2.617 percent on March 1.
Europe’s shared currency weakened 6.7 percent over the past 12 months, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar climbed 6.2 percent, and the yen gained 5.4 percent.
The dollar pared an advance against the yen after the Institute for Supply Management’s index of non-manufacturing industries, which account for almost 90 percent of the U.S. economy, decreased to 53.5 in April from 56 a month earlier. The Tempe, Arizona-based group’s measure was projected to decline to 55.3, according to a Bloomberg News survey. Readings above 50 signal expansion.
The greenback gained earlier as data showed initial claims for unemployment benefits in the U.S. declined by 27,000 to a one-month low of 365,000 in the week ended April 28.
A Labor Department report tomorrow will show U.S. nonfarm payrolls added 160,000 jobs last month, after hiring 120,000 in March, according to the median forecast in a Bloomberg survey.
“Markets are going into the U.S. payrolls after a series of back and forth, and they could react if we see a strong surprise,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “The euro is coming off now, and stocks are probably to blame because the risk currencies are somewhat weaker.”
The dollar has traded in a range of $1.30 to $1.35 per euro since the start of February.
The yen declined on speculation the nation’s exporters are waiting for the currency to fall further before buying it. Japanese markets are shut today and tomorrow for holidays.
“Our internal flows have shown that exporters’ bid for yen has been absent for some time,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “This may suggest perhaps that they still anticipate that the yen could weaken further and are looking for better levels to buy.”
New Zealand’s currency, known as the kiwi, dropped against all of its 16 most-traded counterparts after unemployment exceeded the most pessimistic forecast in a Bloomberg survey.
The jobless rate climbed to 6.7 percent in the first quarter from a revised 6.4 percent in the previous three months, Statistics New Zealand said.
New Zealand’s dollar slid 1.4 percent to 79.95 U.S. cents and reached 79.88 cents, the weakest level since Jan. 17.
A so-called down channel is leading the yen to strengthen versus the dollar, reclaiming some of its losses this year that are the worst among the 16 most-traded currencies, according to JPMorgan Chase & Co.
The yen is poised to appreciate toward 79.55 per dollar, a key support level for the U.S. currency, Niall O’Connor, a New York-based technical analyst with JPMorgan wrote in a note to clients. “Deeper support levels” for the dollar against the yen appear on charts at 79.15 and 78.35, he wrote.
“There hasn’t been a sense of a real turn in the economic picture,” O’Connor said in a telephone interview. “If the economic atmosphere in the U.S. gets worse, it’s a negative for the dollar, and thus the yen will probably outperform.”
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