The dollar gained versus most major peers as speculation that the yen’s decline will continue unabated and the European Central Bank may cut interest rates bolstered the appeal of higher-yielding U.S. financial assets.
The euro dropped versus the dollar after Dow Jones reported Bundesbank President Jens Weidmann said the ECB may lower interest rates if added information warrants the move. The yen fell against the greenback amid bets Japan will escape censure for its weak currency at a Group of 20 meeting this week. Sweden’s krona slid the most since 2011 against the U.S. currency after the Riksbank delayed interest-rate increases.
“This is really the first time we’ve seen someone of Wiedmann’s stature come out and discuss the ECB cutting rates,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said in a telephone interview. “That’s seen as extremely important for the euro, and it’s why you saw the move lower. If you see euro weakness against the dollar, it actually pushes the dollar up against peripherals.”
The dollar gained 1.1 percent to $1.3032 per euro at 5 p.m. New York time, after touching $1.3202 yesterday, the weakest level since Feb. 25. The yen depreciated 0.6 percent to 98.12 per dollar after dropping earlier as much as 0.9 percent. It reached 99.95 on April 11, a four-year low. The yen rose 0.5 percent to 127.87 per euro after falling 1 percent earlier.
The greenback remained stronger against the euro after the Federal Reserve said in its Beige Book business survey the U.S. economic expansion remained “moderate” amid gains in manufacturing, housing and autos. The central bank’s policy-setting Federal Open Market Committee meets April 30-May 1.
The Standard & Poor’s 500 Index slid 1.4 percent after rallying 1.4 percent yesterday, the most in three months.
Sweden’s krona fell versus all of its 16 most-traded counterparts after the Riksbank kept its benchmark rate at 1 percent following four cuts since December 2011. The bank lowered its forecast for the rate to 0.9 percent for the first quarter next year from a previous assessment of 1.2 percent, and signaled increases are unlikely until the second half of 2014.
The krona dropped 2.4 percent to 6.5166 per dollar and slid as much as 2.5 percent, the most since November 2011. The currency depreciated as much as 1.3 percent against the euro, the most since September 2011, to 8.4940.
The Hungarian forint snapped a five-day rally against Europe’s shared currency as investors speculated it gained too much, too quickly, in reaching the strongest in almost two months this week. The forint sank 0.4 percent to 294.94 per euro after reaching 292.51 on April 15, the strongest since Feb. 22.
The Canadian dollar weakened to a one-month low versus its U.S. counterpart after the Bank of Canada Bank of Canada cut its growth forecast for 2013 to 1.5 percent and said economic slack will persist for more than two years. The bank kept its key interest rate at 1 percent for the 21st straight policy meeting.
The currency, called the loonie for the image of the bird on the C$1 coin, slid 0.6 percent to C$1.0266 per U.S. dollar and touched $1.0294, the weakest since March 13.
The U.K.’s pound touched a one-month low versus the euro after Britain’s unemployment rose by the most since November 2011, according to the Office for National Statistics. Minutes released today showed Bank of England head Mervyn King pushed for additional stimulus for a third month before being outvoted at an April meeting.
Sterling fell as much as 0.7 percent to 86.37 pence per euro, the weakest since March 15, before reversing losses to trade at 85.51 pence. The pound lost 0.8 percent to $1.5238.
The euro slid after the report on Weidmann, who’s also a member of the ECB Governing Council.
“We might adjust in response to new information,” the Wall Street Journal quoted the German central-bank chief as saying.
Overcoming the region’s debt crisis and its effects “will remain a challenge over the next decade,” he said.
“Sometimes you get a bit of complacency, but these comments underscore and remind people that more accommodation could be coming from the ECB,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “It shows that people need to be on guard because the fundamental situation still isn’t great in the euro zone.”
The euro erased an earlier loss against the yen after former ECB policy maker Lorenzo Bini Smaghi said the central bank needs to find ways to stop the shared currency’s appreciation.
G-20 finance ministers and central bankers meet for two days beginning tomorrow in Washington, before weekend talks of the International Monetary Fund and World Bank. At their last gathering in February, they signaled that Japan may stimulate its stagnant economy as long as policy makers refrain from publicly advocating a sliding yen.
Japan’s easing policies are “appropriate” and the impact on the yen is “a logical consequence,” IMF Chief Economist Olivier Blanchard said in a recorded statement yesterday.
The Bank of Japan at its policy meeting April 4 pledged to double the monetary base in two years through purchases of government bonds. BOJ Governor Haruhiko Kuroda said last week that while monetary easing tends to weaken a currency, the central bank’s polices aren’t aimed at exchange rates.
The yen plunged 19 percent over the past six months, the worst performance among 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar rose 2.7 percent and the euro gained 2.4 percent.