BLBG: Euro Little Changed After Draghi Rate Pledge as Aussie Declines
The euro was little changed after the European Central Bank kept its monetary policy unchanged and President Mario Draghi said interest rates will stay at present levels for an extended period.
Australia’s dollar fell by the most in a month against its U.S. counterpart as traders revived bets the nation’s central bank will cut interest rates after unemployment jumped to the highest since 2002. The Bloomberg Dollar Spot Index climbed as political tension in Ukraine deepened and U.S. jobless claims dropped. China’s yuan rose to the strongest level since March.
“The rhetoric is likely to remain dovish given the economic outlook and the ongoing development in Ukraine,” Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said of the ECB before Draghi’s speech. “The Australian dollar was under pressure because the labor market has been disappointing and the data today confirmed that trend.”
The euro traded at $1.3379 at 1:41 p.m. London time after sliding to $1.3333 yesterday, the weakest level since Nov. 8. It strengthened less than 0.2 percent 136.85 yen. Japan’s currency weakened 0.2 percent to 102.29 per dollar.
The euro-area recovery is moderate and uneven, and inflation expectations remain firmly anchored, Draghi told reporters in Frankfurt.
ECB Policy
All economists surveyed by Bloomberg predicted ECB officials would keep the refinancing rate at a record-low 0.15 percent. They also forecast an unchanged negative deposit rate.
The euro has weakened more than 4 percent versus the dollar since May 8, when Draghi signaled policy makers would ease monetary policy the following month if needed. It extended losses since June 5, the day ECB policy makers lowered the refinancing rate and moved the deposit rate below zero for the first time.
The policy meeting comes against the backdrop of mounting political crisis. Russia has massed troops along its border with Ukraine and President Vladimir Putin retaliated yesterday against European Union and U.S. sanctions by ordering restrictions on food imports.
The Bloomberg Dollar Spot Index rose 0.2 percent. Jobless claims decreased by 14,000 to 289,000 in the week ended Aug. 2, from 303,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for an increase to 304,000.
Australia’s dollar slid 0.9 percent to 92.71 U.S. cents, the biggest decline since July 3. It earlier touched 92.59 cents, the lowest since June 5.
Australian Unemployment
The nation’s jobless rate jumped to 6.4 percent last month from 6 percent in June, the statistics bureau said. The number of people employed fell by 300, compared with the forecast for an increase of 13,200 in a Bloomberg News survey.
The Aussie has still gained 5.5 percent this year, the best among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as the nation’s benchmark rate of 2.5 percent attracts investors. The U.S. dollar rose 1 percent, while the euro fell 2 percent.
The yuan strengthened for a fourth day as economists predicted tomorrow’s government report will show exports climbed 7 percent from a year earlier in July, compared with 7.2 percent in June. The trade balance will be in surplus for the fifth month, another survey showed. The yuan yesterday rose beyond the central bank’s fixing for the first time since its trading band was doubled to 2 percent on March 17.
“The convergence of the yuan spot and fixing is significant as it shows reduced People’s Bank of China intervention along with improved sentiment over economic fundamentals,” said Banny Lam, co-head of research at Agricultural Bank of China International Securities Ltd. in Hong Kong. “We continue to see portfolio inflows into Chinese assets, which is supportive of the yuan.”
The currency climbed 0.02 percent to close at 6.1619 per dollar, China Foreign Exchange Trade System prices show. It touched 6.1561 earlier, the strongest level since March 17. The closing level was 0.08 percent stronger than today’s reference rate of 6.1670, according to data compiled by Bloomberg.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Lukanyo Mnyanda
