Forex Market Update: Euro Falls Sharply
The euro fell sharply against the U.S. dollar and the Japanese yen on Thursday after European Central Bank (ECB) President Mario Draghi’s comments on recent strengthening of the single currency. The dollar, meanwhile, fell against the yen on Thursday.
The euro had edged higher earlier in the day after the ECB kept its benchmark interest rates unchanged as expected. However, the single currency slipped after comments from the ECB President.
Speaking at a press conference, Draghi said that although economic activity in the euro zone should recover gradually this year, there are more negative risks than positive one. Commenting on the recent strengthening of the euro, the ECB President said that exchange rate is not a policy target, however, it is important for growth and price stability and the ECB certainly wants to see whether the appreciation is sustained.
Ben Emons, Senior Vice President/Global Portfolio Manager at PIMCO, told Reuters that Draghi’s comments were neutral to modestly dovish, which means a rate cut is still on the table. Emons said that if the euro puts too much pressure on CPI, the ECB may have to look at more liquidity operations or a potential rate cut to offset the downward pressure on prices.
At last check on Thursday, the euro was down 0.9% to $1.3394. The single currency fell to an intra-day low of $1.3369. The euro was down 1.2% to 125.08 yen, at last check on Thursday, after hitting an intra-day low of 124.48 yen.
Despite the sharp fall on Thursday, the euro is still up against the dollar and the Japanese yen for the year.
The yen, which has weakened in recent weeks on speculation that the Bank of Japan will implement additional easing measures, edged higher against the dollar on Thursday. At last check, the dollar was down 0.2% to 93.42 yen.
The dollar slipped against the yen following mixed U.S. economic data.