The euro rose to the strongest since July 2011 against the yen after European Central Bank President Mario Draghi said the economy should gradually recover and the decision to refrain from cutting interest rates was unanimous.
The 17-nation currency gained the most in almost four months against the dollar after Spain sold more than the maximum target at its first debt auction of the year, adding to signs the financial crisis is easing. The yen fell for a second day against the dollar on speculation Japanese policy makers will boost stimulus that tends to weaken the currency. Australia’s currency gained after Chinese imports increased.
“The euro really jumped when he said the decision was unanimous,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. “It’s throwing some uncertainty onto whether there will be a cut in one of the coming meetings. The odds of that have been reduced.”
The euro rose 1.3 percent to 116.32 yen at 2:07 p.m. London time after appreciating to 116.49, the strongest since July 8, 2011. The shared currency gained 0.9 percent to $1.3178 after gaining as much as 1 percent, the most since Sept. 14. The yen declined 0.4 percent to 88.24 per dollar.
The ECB left its main refinancing rate at a record-low 0.75 percent at a meeting today in Frankfurt, as forecast by 50 of 55 economists surveyed by Bloomberg News. Five had predicted a reduction to 0.5 percent.
“A gradual recovery should start” later this year as ECB measures work their way through the economy, Draghi said at a news conference. At the same time, risks to the outlook are on the “downside,” he said.
The Spanish Treasury in Madrid raised 5.82 billion euros from the sale of three bonds, exceeding its upper target of 5 billion euros. The auctions included a new two-year note with so-called collective-action clauses limiting investors’ rights to oppose writedowns.
“The euro has rallied with decent bond sales from Spain,” said Peter Frank, global head of foreign-exchange strategy in London at Banco Bilbao Vizcaya Argentaria SA. “There’s not really appetite for a rate cut yet.”
Luxembourg Prime Minister Jean-Claude Juncker said there are signs the region’s financial crisis is easing.
“The worst probably is over, but what we still have to do is difficult,” Juncker, who has been head of the group of euro- area finance ministers since 2005, told a European parliament committee today in Brussels.
The euro has appreciated 1.2 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track the performance among the 10 developed-nation currencies. The yen was the worst performer, dropping 8.1 percent, and the dollar fell 0.8 percent.
The yen declined against all except one of its 16 major counterparts after a draft document obtained by Bloomberg News showed the government expects the central bank to conduct “bold” monetary easing. Bank of Japan Governor Masaaki Shirakawa said yesterday the BOJ was in close cooperation with the government. The central bank next meets on Jan. 21-22.
Japan’s currency depreciated to 88.41 per dollar on Jan. 4, the weakest level since July 2010.
“Expectations are growing that the BOJ will do something and that is weakening the yen,” said Arne Rasmussen, head of currency research at Danske Bank A/S in Copenhagen. “They may add stimulus at the next meeting.”
The yen will depreciate to 90 per dollar within three months, and may fall more rapidly should the BOJ take action at its meeting, Rasmussen said.
The pound rose for the first time in three days against the dollar after the Bank of England kept its benchmark interest rate at 0.5 percent and left its asset-purchase program at 375 billion pounds ($602 billion).
Sterling gained 0.4 percent to $1.6086.
Australia’s dollar strengthened to the highest level in almost four months versus its U.S. counterpart after data showed imports increased in China, the South Pacific nation’s biggest overseas market.
Shipments to China rose 6 percent last month, the customs administration said in Beijing. Economists surveyed by Bloomberg forecast a gain of 3.5 percent.
“The Chinese data is a whole lot better than anyone expected with both imports and exports accelerating,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “That will only add to recent investor optimism that the Chinese rebound has got legs and should take the Aussie dollar higher.”
The so-called Aussie rose 0.6 percent to $1.0576 after appreciating to $1.0587, the most since Sept. 14. The currency gained 1 percent to 93.30 yen after climbing to 93.44, the highest since August 2008.