The yen surged at the fastest rate versus the euro after the Bank of Japan retained its monetary stimulus and the European Central Bank introduced easing measures to boost the euro area economy, such as slashing interest rates.
The yen touched its strongest level in four months against the shared currency after the BOJ retained its policy of expanding the monetary base by 60 trillion yen ($588 billion) to 70 trillion yen annually. The Japan’s currency rose 1.2 percent to 138.17 per euro at Friday’s close in New York, its strongest rally since March 14. The yen also gained 0.4 percent to close at 102.04 against the U.S. dollar while the euro declined 0.8 percent to $1.3540.
“Euro-yen is not far off making new lows for the year,” said Shahab Jalinoos, a Stamford, Connecticut-based senior currency strategist for UBS AG told Bloomberg. “The market came into 2014 expecting more from the BOJ over the course of the year and not necessarily factoring in more easing from the ECB. Now in practice, what we’ve seen is the opposite.”
Last week’s trade also saw the pound rally to its strongest level against the euro since November 2012 after the Bank of England Governor Mark Carney signaled that interest rates may be hiked sooner than expected.
Traders also bet cautiously on the dollar ahead of a meeting by the Federal Reserve on June 17-18 that seeks to decide whether to cut the stimulus. The meeting comes just after last week’s data showed that U.S. consumer confidence plunged to its lowest in three months in June. Another report indicated that U.S. retail sales rose at a much slower pace than expected, indicating that growth remains uneven. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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