The euro weakened from a 2 1/2-year high against the dollar after European Central Bank President Mario Draghi said policy makers were ready to ease monetary policy in June if needed.
The Bloomberg Dollar Spot Index touched a six-month low as Federal Reserve Chair Janet Yellen, testifying for a second day to lawmakers, said the central bank will maintain stimulus as long as necessary. Australia’s dollar strengthened to a three-week high after employers boosted payrolls and Chinese trade data improved. Chile’s peso rallied the most more than two years as inflation rate jumped to a five-year high. Norway’s krone advanced for a third day.
“Draghi’s guidance was the key takeaway from today’s press conference,” Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, said in an email. “The more overt signal of the potential -- if not the outright intention -- to ease policy next month has already worked to drive euro-dollar down after the pair nearly eclipsed the $1.40 threshold.”
The euro dropped 0.5 percent to $1.3840 at 5 p.m. New York time after appreciating to $1.3993, the strongest level since Oct. 31, 2011. The 18-nation currency fell 0.7 percent to 140.70 yen. The dollar weakened 0.2 percent to 101.66 yen.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, was little changed at 1,003.44 after touching 1,000.59, the lowest since Oct. 28.
The Aussie rose versus most of its 16 major counterparts as the statistics bureau said employers added 14,200 jobs in April, surpassing the forecast of 8,800 in a Bloomberg News survey. The unemployment rate stayed at 5.8 percent.
Chinese exports climbed 0.9 percent in April from a year earlier, when figures were inflated by fraudulent invoicing, the customs administration said in Beijing. Imports gained 0.8 percent leaving a trade surplus of $18.46 billion.
“Australia might actually be in a recovery mode,” said Desmond Chua, a strategist at CMC Markets in Singapore. Trade figures in China have “definitely helped improve overall sentiment on the Chinese markets, and we’re looking at some form of spillover into the Aussie dollar,” he said.
Australia’s currency rose 0.5 percent to 93.75 U.S. cents after climbing to 93.94 cents, the strongest since April 15.
Chile’s peso surged to a three-week high after official data showed inflation rate increased to 4.3 percent in April from 3.5 percent the previous month, the highest level in five years and exceeding the target rate, damping expectations of an interest-rate cut next week.
“The probability of that happening has reduced significantly after this number,” Ruben Catalan, an economist at Banco de Credito e Inversiones in Santiago, said by phone of a rate decrease. “The central bank will probably pause to prevent more rate cuts from increasing inflationary pressures.”
The peso jumped as much as 2.2 percent, the biggest intraday gain since Nov. 30, 2011, to 552.98 per greenback, the strongest since April 15, before trading at 554.99.
Norway’s krone strengthened after a report showed manufacturing production rose 0.8 percent in March, beating the forecast of 0.2 percent in a Bloomberg survey. Norges Bank kept its main interest rate unchanged and maintained its commitment to tighten monetary policy in mid-2015.
The Norwegian currency appreciated 0.7 percent to 8.1648 per euro after advancing to 8.1469, the strongest since Nov. 8. The krone gained 0.2 percent to 5.8995 per dollar.
The South African rand rose to its strongest level this year as voting results showed the ruling African National Congress is on course to win a fifth election victory.
The currency advanced 1.1 percent to 10.3359 per dollar after appreciating to 10.3128, the strongest since Dec. 25.
The common currency dropped versus all of its 16 major counterparts except Denmark’s krone as Draghi’s comments in Brussels raised the prospect of additional stimulus that tends to weaken foreign-exchange rates.
“The Governing Council is comfortable with acting next time, but before we want to see the staff projections that will come out in the early June,” Draghi said after the ECB kept its benchmark interest rate at a record-low 0.25 percent, as predicted by 56 of 58 economists surveyed by Bloomberg News. “There wasn’t a decision today. It’s a preview of the discussion we will have next month.”
A stronger euro “in the context of low inflation is cause for serious concern,” Draghi said.
The euro gained 5.4 percent in the past 12 months, the third-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 1.3 percent and the yen weakened 2.5 percent.
“The euro reversed its course after Draghi said the ECB is comfortable with acting in June,” said Arne Rasmussen, head of foreign-exchange research at Danske Bank A/S in Copenhagen. “The market appears to take that seriously. The ECB has done the talk, now it’s time it walked the walk.”
While the euro is 7 percent too strong against the dollar, it is cheap versus eight of its 12 major peers, according to an Organisation for Economic Cooperation & Development model of purchasing power parity. The Swiss franc is 36 percent overvalued, the Norwegian krone 33 percent and Britain’s pound 15 percent. The yen is 21 percent undervalued, and Mexico’s peso is 66 percent too cheap.
The U.S. dollar dropped for the fourth time in five days versus the yen as Yellen said fiscal policy has served as a drag on the economy, and labor force participation will continue to decline.
The Fed said on April 30 it will keep the benchmark interest rate at almost zero for a “considerable time” after its bond-buying program ends. It reduced monthly purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” were likely.
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