The euro rose to a two-month high versus the dollar after European Central Bank President Mario Draghi said inflation is expected to surge gradually, damping bets policy makers will present further financial stimulus.
The 18-nation currency marched higher against all except one of its 16 major peers as the central bank projected economic development will accelerate. The yen pulled back to a five-week low against the greenback after an advisory panel said Japan's Government Pension Investment Fund no longer needs to focus on domestic bonds. The dollar tumbled against most of its major counterparts before a non-farm payrolls report tomorrow that is projected to display employment progress in February trailed last year’s average.
“A large part of the market was expecting some form of action from the ECB today, or some indication that monetary easing would be coming in the very near future,”Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc., said in a phone interview. “We didn’t get either of those things, which is why the euro is trading higher across the board.”
The euro soared 0.9 percent to $1.3861 at 5:02 p.m. in New York after surging to $1.3873, the peak mark since December 27. The shared currency leaped 1.7 percent to 142.86 yen, the largest surge since September 19. The yen slumped 0.8 percent to 103.07 per dollar after relinquishing to 103.17, the lowest since January 29.
EM Strength
A custom Bloomberg index of the 20 most-exchanged emerging-market currencies rallied 0.6 percent, its largest advance in more than a month, to its top performing mark since January 14.
The Indian rupee spiked higher against the majority of its 24 most-exchanged emerging-market counterparts after a report showed the nation’s current-account deficit shrank to the smallest in four years. The currency increased 1 percent to 61.115 per dollar after surging 1.1 percent to 61.105, the strongest since December 10.
Hungary’s forint and Poland’s zloty were also among the largest emerging-market currency advancers, leaping 1.1 percent and 1 percent.
The Russian ruble sagged down as speculation political tension in Ukraine may deepen curbed appetite for the nations’ assets. Crimea’s parliament voted to become a part of Russia and the region will hold a referendum March 16 on whether to remain part of Ukraine, according to a statement on its website. The currency missed 0.2 percent to 36.1806 per dollar after earlier relinquishing 0.6 percent.
‘Hidden Treasure’
“The weak ruble is probably the best thing that could happen for the Russian economy,” David Woo, the New York-based head of global rates and currencies at Bank of America Corp., said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene and Adam Johnson. “That’s probably the hidden treasure from this crisis.”
Australia’s dollar continued its daily winning streak to the lengthiest since December after the Bureau of Statistics said exports surpassed imports by A$1.43 billion ($1.3 billion) in January, the most since August 2011. Retail sales hiked 1.2 percent.
“The improving global economy is, of course, always supportive of the Australian dollar so you can include that in the basket of reasons for why the Aussie has got some tactical upside momentum,” said Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney.
The Aussie bolstered 1.2 percent to 90.90 U.S. cents.
Central Bank
The ECB left its standard interest rate at 0.25 percent at its monthly meeting in Frankfurt as forecast by 40 out of 54 economists surveyed by Bloomberg News. The other 14 were predicting a rate cut.
Euro-area inflation, which was at 0.8 percent in February, will boost to 1.7 percent in the fourth quarter of 2016, Draghi said at a press conference in Frankfurt after the finalization. Consumer prices will increase 1 percent this year, he said. ECB officials see inflation at 1.3 percent in 2015 and an average rate of 1.5 percent in 2016, he said.
Draghi also said he saw no need to stop the absorption of liquidity made by bond purchases under the ECB’s now defunct Securities Markets Program. He also stated that the exchange rate was not a policy target. Additional stimulus measures tend to weaken a currency.
“The euro is rising on Draghi’s general upbeat view,” said Gavin Friend, a foreign-exchange strategist at National Australia Bank Ltd. in London. “The notion the recovery proceeds, albeit at a slow pace and remains fragile, but is going to plan. The ECB is emboldened by last week’s turn” in inflation and bank-lending data, he said.
Yen Weakness
The euro skyrocketed 6.4 percent during the past 12 months, the third best mover of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar inched down 0.1 percent and the yen gave up 8.9 percent.
The yen slide down versus all of its 16 major counterparts as a draft report from the committee formed to help the health ministry decide on investment goals for the 128.6 trillion-yen ($1.3 trillion) government investment fund said it should seek yearly returns of 1.7 percent plus the rate of pay hikes for workers.
The yen also slumped amid speculation tensions surrounding Ukraine will ease, trimming down demand for haven assets.
“The advisory panel has been arguing for some time that the government needs to push the GPIF away from JGB investments,” said Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, referring to Japanese government bonds. “The general tone of the markets is one of favoring risk appetite and that’s helping to weaken the yen.”
The dollar depreciated before the Labor Department report estimated to display 149,000 added jobs in February, based on the median estimate in a Bloomberg survey of economists, after a 113,000 increase a month earlier. Payroll gains averaged almost 200,000 a month in 2013.
