The euro slid against the yen and the dollar after European Central Bank President Mario Draghi failed to offer sufficient measures to curb the region’s debt crisis.
The shared currency fell versus most major peers after Draghi said Germany’s Bundesbank has reservations about his plan to buy bonds, which remains to be fleshed out. The pound gained for the first time in three days versus the euro after the Bank of England kept its bond-buying program and interest rate unchanged. The dollar rose before data tomorrow that may show the U.S. unemployment rate stayed above 8 percent last month.
“The market was looking for a big bazooka from Draghi, and they were disappointed by the lack of a coherent plan,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. “A timetable and a start date would comprise meat on the bones. The market wanted a plan and they got a framework, and the reaction was ultra-negative.”
The euro dropped 0.6 percent to 95.30 yen at 5 p.m. in New York after rising as much as 1.1 percent. The single currency fell 0.4 percent to $1.2180 after climbing 1.5 percent to $1.2405, the highest level since July 5. The dollar declined 0.3 percent to 78.24 yen.
The 17-nation currency erased its advance against the greenback as Draghi spoke to reporters in Frankfurt after the ECB’s policy decision. It slid almost 3 cents from today’s high to its low of $1.2134, the biggest trading range for the currency pair since Nov. 30, when the Federal Reserve and five other central banks cut the cost of emergency dollar funding for European banks in response to the continent’s debt crisis.
ECB officials are working on a plan to buy bonds in sufficient quantities to ease Europe’s fiscal turmoil, Draghi said. Details will be released in coming weeks, he told reporters at a news conference in Frankfurt.
“The market expected to be disappointed, but even so, the bare minimum we need is for the ECB to reactivate the securities market program and buy bonds,” said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London. “While they’ve indicated they’ll do it at some point, they are doing nothing today, which is even less than was necessary to calm a market that is so pessimistic.”
The Standard & Poor’s 500 Index (SPX) fell 0.7 percent, while the yield on the 10-year Treasury decreased five basis points, or 0.05 percentage point, to 1.48 percent as investors seeking safety bought U.S. government debt.
The euro strengthened in earlier trading as the ECB kept its benchmark interest rate at 0.75 percent at a policy meeting today, in line with the forecast of 51 of 55 analysts surveyed by Bloomberg News. Four predicted a reduction to 0.5 percent.
The U.S. currency gained against most major counterparts as a report showed initial claims for unemployment benefits increased last week, rising by 8,000 to 365,000. U.S. nonfarm payrolls added 100,000 jobs last month, while the jobless rate remained at 8.2 percent, economists surveyed by Bloomberg forecast before the Labor Department reports the data tomorrow. The unemployment rate has stayed above 8 percent for 41 consecutive months.
The Fed declined at a meeting this week to boost monetary stimulus, while indicating a sluggish economy may prompt further steps to boost growth.
The dollar gained 0.5 percent in the past week against nine-developed nation counterparts as measured by the Bloomberg Correlation-Weighted Indexes. The euro fell 0.8 percent, while the pound slid 1.2 percent.
Sterling rose against the euro today after the U.K. Monetary Policy Committee maintained its bond-buying program at 375 billion pounds ($582 billion) and left interest rates at a record-low 0.5 percent, in line with the median forecasts in Bloomberg surveys.
The pound gained 0.2 percent to 78.51 pence per euro, after falling 0.5 percent earlier. The U.K. currency declined 0.1 percent to $1.5515.
New Zealand’s dollar rose against all its major after milk powder prices for October delivery increased 4.5 percent, according to a trade-weighted index on Fonterra Cooperative Group Ltd.’s GlobalDairyTrade website. Auckland-based Fonterra accounts for about 40 percent of the global trade in dairy products.
The currency, known as the kiwi, added 0.3 percent to 81.02 U.S. cents. It was little changed at 63.39 yen.
Australia’s dollar was little changed versus the dollar as risk appetite slid. It rallied earlier after reports showed improvement in retail sales and trade, boosting prospects the Reserve Bank of Australia will leave rates unchanged at a meeting next week.
Traders are betting the RBA will reduce the benchmark lending rate by 73 basis points in the next 12 months, according to a Credit Suisse Index based on overnight swaps.
The Aussie dollar traded at $1.0465 after rising earlier as much as 1.1 percent to $1.0580, the highest level since March 20. It fell 0.2 percent to 81.88 yen.
The Australian and New Zealand dollars rose to record highs against the euro as the shared currency tumbled. The Aussie climbed to A$1.1606, and the kiwi advanced to NZ$1.4995.
“The Aussie and the kiwi are two currencies that seem to be standing apart from the general risk-on and risk-off sentiment around the ECB and Fed statements,” said Ravi Bharadwaj, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU:US) “The Aussie’s most recent reports on retail sales, as well as trade balance, give the Reserve Bank of Australia a little more time to understand the direction of the Australian economy.”
To contact the reporters on this story: Allison Bennett in New York at email@example.com; Joseph Ciolli in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Robert Burgess at email@example.com