The euro fell sharply on Friday after European Central Bank chief Mario Draghi said inflation expectations were declining to levels that were very low, keeping the door open for further monetary easing soon. The euro fell 1 percent to $1.2413 against dollar and tumbled 1.32 percent to 146.27 yen.
"His comments have hit the euro hard," said Niels Christensen, FX strategist at Nordea, adding that euro zone inflation data next week would be a crucial influence on the ECB's thinking. The Australian dollar and other high yielding currencies jumped after China cut benchmark interest rates for the first time in over two years to bolster a sagging economy.
The Aussie, which is often used as a more liquid proxy for Chinese investments, was last up .89 percent to $0.8695 , with the rate cut likely to assuage fears of a Chinese slowdown that have hurt commodity currencies. The dollar fell to 117.81 from around 118 yen before his comments. The dollar has climbed almost 10 yen since the Bank of Japan surprisingly eased policy in late October.
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