Euro Plunges as Policy Makers Announce “Unconventional Measures” to Increase Inflation

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Euro Plunges as Policy Makers Announce “Unconventional Measures” to Increase InflationThe euro plunged today after the European Central Bank hinted that it will resort to unconventional measures to combat the low inflation in the eurozone, and maintained the interest rates.

The 18-nation currency fell to $1.3736 as ECB President Mario Draghi briefed reporters, before plunging even further to $1.3711 shortly after. The currency was last trading 0.4 percent lower against the greenback at $1.3716; and went down 0.14 percent and 0.25 percent lower against the British pound and the Japanese yen respectively.

“The (ECB’s) Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation,” Draghi told reporters.

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Inflation in the economic bloc was 0.5 percent in March, its lowest so far since the 2009 global economic recession. It is also in the sixth month of what Draghi terms as the “danger zone” of under 1 percent.

“The ECB is being slightly more dovish than the market expected,” Kathy Lien, the New York-based head of BK Asset Management told Reuters. “The main takeaway is that the council is considering unusual techniques, and that’s negative for euro/dollar.”

The U.S. dollar index was up at 80.418 in early trade in New York. The U.S. currency went higher against the yen at 103.95 yen after earlier reaching a peak of 104.06, the highest since January 23.

So far, the dollar has advanced roughly 3 percent versus the yen after U.S. Federal Reserve Chair Janet Yellen disclosed that the Fed may increase borrowing costs this spring. Tomorrow’s data on job statistics may determine the direction the dollar will further head.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com