Euro Up Most in 8 Weeks on Draghi Views; Yen Weakens to 2009 Low

The euro strengthened the most in eight weeks against the dollar after European Central Bank President Mario Draghi said data suggest the region’s economy will stabilize this year.

The yen fell to lowest level since August 2009 versus the dollar after Bank of Japan’s Masaaki Shirakawa’s final meeting amid speculation his successor will expand monetary stimulus and debase the currency. The 17-nation currency advanced for a second day versus the yen as ECB policy makers refrained from cutting their benchmark interest rate at a meeting today and Spanish borrowing costs declined at a bond auction. The dollar declined versus most major peers before a report tomorrow forecast to show increased jobs gains in February.

“The rally in Spanish bond yields showed the market is feeling a little bit more confident with the situation in Europe,” Steven Englander, head of Group of 10 currency strategy at Citigroup in New York, said in a telephone interview. “The Draghi press conference dealt with questions well, which kind of enhanced the euro’s move up.”

The euro rose 1.1 percent to $1.3107 at 5 p.m. in New York after gaining as much as 1.2 percent, the most since Jan. 10, when the ECB also held a policy meeting. The single currency advanced 1.9 percent to 124.28 yen.

Yen Slumps

Japan’s currency weakened 0.8 percent to 94.82 per dollar, falling below 95 and touching the lowest level since Aug. 18, 2009.

“Both fiscal and monetary policy are working together to revive the Japanese economy, and that’s currency negative,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia, said by phone from Toronto.

Sweden’s krona climbed to the strongest since August against the euro after Riksbank Governor Stefan Ingves signaled policy makers will tolerate further gains, telling Swedish lawmakers that the currency’s level was “not in any way remarkable.” The krona gained 0.4 percent to 8.2942 per euro after appreciating to 8.2845, the strongest level since Aug. 28.

The South Korean won snapped a two-day rally against the dollar as global investors sold shares in the country and after Credit Suisse Group AG recommended betting against the currency. The won declined 0.4 percent to 1,082.60 per dollar after falling as much as 0.5 percent.

Rand Reacts

South Africa’s rand reached its weakest level in almost four years as labor protests at mines spurred concern of a repeat of violence that curbed production last year. It decreased 0.2 percent to 9.1441 per dollar after reaching 9.1884, its lowest level since April 2009.

“In the near-term, the euro should stay above $1.30 and will possibly pop to $1.32 or $1.33,” said Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd in London.

The ECB kept its benchmark rate at a record low of 0.75 percent as forecast by 56 of 61 economists surveyed by Bloomberg News. Five predicted a reduction to 0.5 percent.

“Later in 2013 economic activity should gradually recover, supported by a strengthening global backdrop and our accommodative monetary policy stance,” Draghi said at a press conference in Frankfurt after the decision was announced. The euro’s exchange rate is in line with long-term averages and is not a policy target, he said.

Spain’s Debt

The single currency strengthened in earlier trading after Spain sold 5.03 billion euros of bonds, surpassing its target of 5 billion euros. The Madrid-based Treasury auctioned 10-year securities at an average yield of 4.917 percent, down from 5.20 percent at the previous sale on Feb. 21.

The euro has appreciated 1.8 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar gained 2.5 percent and the yen slumped 7.1 percent.

The pound reversed earlier losses versus the dollar after the Bank of England’s Monetary Policy Committee held its asset-purchase target at 375 billion pounds ($565 billion), as forecast by 29 of 39 economists surveyed by Bloomberg. Ten predicted an expansion.

“Clearly not all members of the MPC are on the same page yet and some hawkishness remains,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London, before the decision. “The pound will advance initially.”

The pound was little changed at $1.5014 after dropping to $1.4967, the weakest level since July 2010. Sterling declined 1.1 percent to 87.30 pence per euro.

Japan Policy

The yen dropped for a second day versus the dollar even as the BOJ rejected a call for an immediate start to open-ended asset purchases. Shirakawa left policy unchanged at his final meeting yesterday before his March 19 exit.

Investors are focused on changes his nominated successor, Haruhiko Kuroda, may enact, with the Nikkei 225 Stock Average rising 35 percent since mid-November in anticipation of more aggressive stimulus.

The Japanese currency also fell after a Labor Department report showed the number of Americans who filed for unemployment benefits declined to a six-week low, damping demand for the relative safety of the yen.

First-time U.S. jobless claims fell by 7,000 to 340,000 in the week ended March 2, the lowest since the period ended Jan. 19, the Labor Department said. The median forecast of economists surveyed by Bloomberg was for an increase to 355,000.

U.S. employers added 165,000 jobs last month, compared with 157,000 in January, according to a Bloomberg News survey of economists. The unemployment rate held at 7.9 percent, another survey projected.

“U.S. data surprised positively and therefore the dollar bounced higher against the yen in line with an increase in risk appetite,” said Peter Kinsella, a currency strategist at Commerzbank AG in London.