BLBG: Euro Rises Against Dollar, Yen As ECB Keeps Key Rate Unchanged
The euro strengthened against the dollar and the yen as the European Central Bank kept its benchmark interest rate unchanged at a record-low 0.75 percent.
The 17-nation currency appreciated versus 14 of its 16 major counterparts. The decision was in line with the forecast of 51 of the 55 analysts surveyed by Bloomberg News. Four predicted a cut to 0.5 percent. ECB President Mario Draghi will hold a press conference at 2:30 p.m. in Frankfurt to explain the decision. The pound dropped against the euro as the Bank of England kept its bond-buying program and benchmark rate on hold.
“If the ECB hold rates, the market will be waiting for something like a silver bullet from Draghi in the press conference,” Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said before the policy announcement. “It will be quite tough to beat expectations, and I think he might disappoint, meaning we may see declines in the euro.”
The euro gained 0.6 percent to $1.2295 at 12:55 p.m. in London after falling 0.6 percent yesterday. The common currency advanced 0.3 percent to 96.13 yen. The dollar dropped 0.3 percent to 78.22 yen.
Draghi pledged last week to “do whatever it takes” to preserve the common currency, stoking speculation that policy makers will intervene in bond markets to support ailing euro- area economies.
“A lot of people are expecting the ECB to announce some sort of ‘shock-and-awe’ policy today,” said Peter Dragicevich, a Sydney-based foreign-exchange economist at Commonwealth Bank of Australia. (CBA) “If the ECB were to disappoint, we expect the euro to fall.”
Pound Falls
The pound fell to the lowest in almost three weeks against the euro as the Bank of England announced its decision. The Monetary Policy Committee maintained its bond-buying program at 375 billion pounds and left interest rates at a record-low 0.5 percent, in line with the median forecasts in Bloomberg surveys.
Sterling weakened 0.3 percent to 78.93 pence per euro after dropping to 79.07 pence, the lowest level since July 13. The pound rose 0.3 percent to $1.5578.
The euro has depreciated 4.3 percent in the past six months, the worst performance of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 0.1 percent and the dollar strengthened 3 percent.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
