The euro fell versus most of its 31 major peers as European Central Bank President Mario Draghi said stimulus to lift the euro area’s “abysmal” performance may include buying government bonds.
The yen rebounded from its weakest level since 2008 versus the shared currency after Japan’s economy unexpectedly sank into recession, reviving demand for safer assets. The Swiss franc strengthened to within 0.1 percent of its 1.20-per-euro cap. The U.S. dollar rose against most of its major counterparts as emerging-market currencies declined.
“What Draghi said has really been that they’re doing what they can to try to ease the credit cycle and try to support the economy,” said Mark McCormick, a foreign-exchange strategist in New York at Credit Agricole SA. “The market just really wants to continue to sell the euro. To me though, it’s starting to look a little bit overdone.”
The euro fell 0.6 percent to $1.2450 as of 5 p.m. in New York. The yen appreciated 0.3 percent to 145.22 per euro, after earlier touching 146.53.
Japan’s currency dropped 0.3 percent to 116.65 per dollar, having reached 117.05, the weakest level since October 2007. The yen’s 14-day relative strength index against both the dollar and euro remains below the 30 level that some traders see as an indicator the currency is poised to strengthen.
The yen has tumbled 7.1 percent in the past month the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has lost 0.3 percent, while the dollar has added 2.4 percent.
Switzerland’s franc appreciated to 1.20108 per euro amid speculation the nation’s central bank will intervene to stop its currency from strengthening further.
The Swiss National Bank introduced the 1.20 ceiling on the franc’s value in September 2011 after an investor exodus from euro assets during the sovereign-debt crisis pushed it close to parity with the common currency.
The U.S. dollar gained against most emerging-market currencies as an index of developing nations slumped to its lowest since March 2009. The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.4 percent to 1,096.71.
The dollar has gained about 7 percent against the yen since Oct. 30 after the Bank of Japan surprised investors the following day with further currency-depreciating stimulus, known as quantitative easing, and the government announced pension reforms that allow more money to flow abroad. The central bank meets again this week.
Japan’s economy shrank an annualized 1.6 percent in the third quarter, after contracting a revised 7.3 percent in the previous three months, a report showed today. Economists surveyed by Bloomberg News predicted an expansion of 2.2 percent.
With Japan slipping into recession, speculation is mounting that Prime Minister Shinzo Abe will delay a planned tax increase and call an early election to strengthen his mandate.
“We’re seeing a little bit of a retracement and I think that could just be pretty much profit-taking,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York. “The snap election that’s likely to be called this week will aim to re-ignite the policies that Mr Abe’s trying to achieve to reach his economic goals.” The bank is seeing a lot of interest in buying dollar-yen on declines, she added.
The euro weakened as Draghi said “unconventional measures” that the ECB may consider in its battle to boost growth in the region might include sovereign-bond purchases, in Brussels during quarterly testimony to lawmakers at the European Parliament.
Trading in over-the-counter foreign-exchange options on euro-dollar accounted for 24 percent of trades today, according to Depository Trust Clearing Corp. data. Dollar-yen accounted for 28 percent of volume.
Draghi’s “putting pressure back on European lawmakers to do their part,” Greg Anderson, head of global foreign-exchange strategy in New York at Bank of Montreal, said by phone. “The market’s pricing in a little greater odds of sovereign quantitative easing.”