RTRS: FOREX-Euro up as ECB cuts rates by less than expected
The euro jumped against the dollar on Thursday after the European Central Bank delivered a smaller interest rate cut than expected and only hinted vaguely that it could adopt more aggressive means to boost growth.
The euro soared to nearly $1.35 after the ECB cut lending rates to 1.25 percent, confounding expectations for a deeper cut to 1 percent, but eased a bit as ECB President Jean-Claude Trichet refused to rule out additional rate cuts in future.
He also said officials had yet to decide on "non-standard" policy measures to boost growth and would offer more details at the central bank's next policy meeting.
Markets had been on alert for any sign that the ECB planned to follow other central banks and buy corporate or government debt to increase the money supply and stimulate bank lending.
"There is still an if," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "He leaves enough wiggle room. They are not ruling anything out but not announcing anything today."
The euro was last at $1.3404 , up 1.3 percent on the day though well off a session peak of $1.3489 right before Trichet's comment about "non-standard" policy measures.
It rose 2.2 percent to 133.30 yen while the dollar was up 0.9 percent at 99.47 yen after earlier touching a five-month peak of 99.90.
Earlier, the dollar fell broadly in tandem with the yen as risk appetite improved on the back of a global stock market rally on hopes a deep global recession would moderate and on indications the G20 summit would produce more government action to help the global economy.
Analysts said the main message from Trichet was that nothing concrete is imminent in terms of quantitative easing -- the process of flooding the banking sector with money when rates are at or near zero.
"What the ECB is signaling is that they may have an optimistic view of the economy -- that there is a potential bottoming out," said GFT Forex strategist Boris Schlossberg. "So they don't feel that drastic measures are necessary at this point and a gradual approach is a better approach."
