Euro Goes to First From Worst on Bets Draghi Done Cutting Rates

  • Single currency set for best week in a month after ECB meeting
  • Draghi's comments `undermined' stimulus boost: Shinkin's Kato

The euro headed for its best week in more than a month against the dollar as speculation the European Central Bank has finished cutting interest rates outweighed the impact of increased stimulus at its Thursday meeting.

The single currency has strengthened against all its Group-of-10 peers during the past week, after having dropped versus all of them in the month before this week’s ECB gathering. The euro surged as much as 2 percent on Thursday after ECB President Mario Draghi signaled more rate cuts probably won’t be needed. That was after the central bank cut its deposit and benchmark rates and boosted debt purchases.

‘‘The ECB delivered a full stimulus line-up yet Draghi’s comments undermined it,” said Jun Kato, a senior fund manager at Shinkin Asset Management in Tokyo. “Markets are seeing a limit to monetary easing, that there’s so much that can be done by cutting rates when appetite for borrowing cash is weak.”

The euro has advanced 1.5 percent this week to $1.1176 as of 12:23 p.m. in Tokyo, the biggest gain since the period ended Feb. 5. It reached $1.1218 on Thursday, the strongest level since Feb. 15. The currency has gained 1 percent this week to 126.41 yen. It was little changed versus both its peers on Friday.

Biggest Swing

The euro’s swing on Thursday between a 1.6 percent decline and 2 percent gain was the biggest intraday range since the ECB’s previous meeting on Dec. 3 when Draghi’s extension of stimulus underwhelmed investors and sparked the currency’s biggest one-day increase since 2009.

The yen is set for a second weekly gain versus the dollar before the Bank of Japan holds a policy meeting on March 14-15. The central bank will keep its policy rate at minus 0.1 percent and its pledge to increase the monetary base at an annual pace of 80 trillion yen ($707 billion), according to Bloomberg surveys.

“Draghi disappointed with his communication and some may need to amend their damaged positions,” said Yujiro Goto, senior currency strategist at Nomura International Plc in London. “Expectations for the BOJ to ease next week have fallen considerably. While markets are positioning for no action, any disappointment after the fact may spark yen selling against the dollar.”

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