The euro slid against the dollar and yen after European Central Bank President Jean-Claude Trichet said inflation risks will be watched “very closely,” signaling the ECB may wait until after June to raise interest rates again.
Japan’s currency climbed against all of its 16 most actively traded peers. Speaking at a news conference in Helsinki, Trichet refrained from using the phrase “strong vigilance,” which may have signaled a June rate increase. European policy makers left the main refinancing rate unchanged at 1.25 percent today, as predicted by all 48 economists in a Bloomberg survey. The central bank last month raised the rate by 25 basis points, the first increase in almost three years.
The euro dropped 0.9 percent to $1.4695 at 1:54 p.m. in London. It earlier climbed to $1.4900. The common currency slid 1.8 percent to 117.42 yen, while the Japanese currency surged 1 percent to 79.78 per dollar.
“By signaling that a June rate hike is not likely, Trichet has put the euro under pressure,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S in Copenhagen. “A June hike has to be priced out of the market.”
The yen strengthened, falling below 80 per dollar for the first time since central banks intervened to weaken the currency in March, on demand for the safest assets.
“There’s been some risk adjustment,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “The trigger has been the move lower in commodity prices.”
The yen appreciated as oil declined for a fourth day in New York, adding to signs of slowing growth in the U.S. Oil for June delivery lost as much as 2.8 percent to $106.20 a barrel in electronic trading on the New York Mercantile Exchange.
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