The yen slipped from a seven-week high against the dollar and declined versus other major currencies on Thursday as an upbeat tone in global stock markets reduced the Japanese currency's safe-haven allure. The euro erased gains against the dollar after the European Central Bank offered no signs of an exit from unconventional measures aimed at stimulating the economy and signalled that interest rates will remain low for some time.
Shares on Wall Street edged higher as investors focused on strength in sales by key retailers and a 4.8 percent rally in the Shanghai Composite Index reassured investors that China can support a global economic recovery and raised appetite for risky assets.
"We've seen the strong performance overnight in the Chinese stock exchange. Some positive sentiment spilled over into European and North American trading," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
"There's clearly a risk appetite bias, but ... I think ahead of tomorrow's (non-farm payrolls) numbers, it's unlikely to become a strong trend," he added. The ECB earlier held interest rates at a record low 1.0 percent as widely expected and warned that now was not the time to withdraw state support as economies emerge slowly from recession. There are increasing signs of stabilisation in the euro area economy, but uncertainty remains high, ECB President Jean-Claude Trichet said.
"Given the recent upside surprises to euro zone economic data, the market appeared to be somewhat positioned for a more hawkish tone from the ECB president," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington. "On balance, his comments are cautious with regard to the economic outlook and that's dampening some of the euro's previous upbeat tone."
In late afternoon New York trading, The dollar rose 0.5 percent to 92.62 yen, after falling as low as 91.92 yen, according to Reuters data, its lowest since July 13. The euro was little changed at $1.4254, off a session peak of $1.4348, according to Reuters data. The yen also fell against other major rivals, with the euro up 0.4 percent, sterling up 0.8 percent, the Swiss franc up 0.3 percent, the Canadian dollar up 0.6 percent and the Australian dollar up 1.1 percent. The euro also came under pressure after the ECB's Trichet confirmed the European central bank would offer banks unlimited 12-month funds at a flat rate of 1.0 percent, offering no sign of easing up on unconventional measures.