Euro Set for Best Month Since April as Mersch Fails to Stem Gain

The euro held gains versus most of its major peers after comments by European Central Bank’s Yves Mersch on the scope for further monetary stimulus failed to stem its biggest monthly advance since April.

The common currency advanced as Mersch, a member of the executive board, said policy makers have “by no means used up all our ammunition,” according to an excerpt from an interview with the International Bankers Forum, due to be published on Tuesday. Analysts this month have raised their 2016 year-end forecast for the euro by a cent to $1.06 after the stimulus measures announced by European Central Bank President Mario Draghi underwhelmed market expectations on Dec. 3.

“People are just in wait-and-see mode and are not quite willing to put on fresh positions there,” said Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd. “In their last big statement, they didn’t deliver what the markets were expecting.”

The euro bought $1.0978 at 9:22 a.m. in Tokyo, after gaining 0.1 percent to $1.0968 Monday. The single currency was little changed at 132.08 yen, after rising 0.1 percent in New York. Markets in Australia, the U.K. and Canada were closed Monday for national holidays.

The euro has surged 3.9 percent versus the dollar this month, its best month since April
even amid additional quantitative easing in Europe and the U.S.’s first interest-rate increase since 2006. While ECB President Mario Draghi reiterated earlier this month that the exchange rate isn’t a policy target in itself, he acknowledged it is “important” for price stability and growth.

The ECB still has “ammunition and firepower,” according to Mersch, who added that the central bank’s quantitative easing program can be further extended and that additional reductions in the deposit rate are possible.

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