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’s message was less dovish than expected, and that helped the euro to bounce back from those intraday lows,” 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 euro gained 0.2 percent to 105.69 yen at 10:55 a.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 $1.3151 after falling earlier as much as 0.5 percent. The yen fell 0.3 percent to 80.35 per dollar, after losing 0.5 percent earlier.
The Standard & Poor’s 500 Index retreated 0.3 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials dropped 0.8 percent.
Mexico’s peso weakened 0.3 percent to 12.9764 per dollar, and Australia’s dollar lost 0.7 percent to $1.0265.
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.
The euro has 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 percent, and the yen gained 5.2 percent.
The yen pared losses against the dollar and euro 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 Japanese currency fell earlier against most major counterparts after the Labor Department said 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.
U.S. employers added 160,000 jobs last month, after hiring 120,000 in March, according to a Bloomberg survey before tomorrow’s nonfarm payrolls report from the Labor Department.
The yen also 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.
‘Could Weaken Further’
“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 dollar, 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.
“The overall unemployment headline number is worse,” said Tim Kelleher, Auckland-based head of institutional foreign- exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. “The kiwi didn’t like the data.”
New Zealand’s currency dropped 1.2 percent to 80.08 U.S. cents and reached 80.02 cents, the weakest level since Jan. 20.
The euro may fall to this year’s low against the dollar should it break below an area of so-called support, Commerzbank AG said, citing trading patterns.
“Euro-dollar has seen significant failure at the $1.3269 and $1.3273 downtrends,” Karen Jones, head of fixed-income, commodity and currency technical analysis in London, wrote in a note to clients. Those levels represent the five-month downtrend and the eight-month channel, she said.
The euro is now likely to head toward support at its February low of $1.2974 and at $1.2954, which represents the 61.8 percent Fibonacci retracement of its rally in January and February. “Failure here will target the $1.2624 January low,” she wrote.
Fibonacci analysis is based on the theory prices rise or fall by certain percentages after reaching a new high or low. Support is an area on a chart where buy orders may be clustered.