The euro plunged to a two-year low against the US dollar on Thursday as comments from European Central Bank President Christine Lagarde were viewed as a sign that the ECB was in no rush to raise interest rates, in contrast with an aggressive monetary policy tightening effort by the U.S. Federal Reserve.
The European single currency fell to $1.0758, the lowest level since April 2020. It was last down 0.53% at $1.0827.
Lagarde said there was no clear timeframe for when rates would start to rise, adding that it could be weeks or even several months after the end of the ECB’s stimulus scheme.
“We’ll deal with interest rates when we get there,” she added.
The ECB on Thursday concluded its latest meeting with cautious steps to unwind support and avoided a hard schedule. It confirmed plans to cut bond purchases, commonly known as quantitative easing, this quarter, then end them at some point in the third quarter.
Against sterling, the euro slid to a one-month low and was last down 0.28% at 82.79 pence.
Lagarde’s comments were in stark contrast to those of Fed Chair Jerome Powell, said Joseph Trevisani, senior analyst at FXStreet.com.
“They could have taken a book from what Jerome Powell has done, and that is to be aggressive rhetorically. Ms. Lagarde did not seem disposed to do that. She was more concerned apparently, and maybe understandably, about the Ukraine war and its impact on Europe,” he said.
In addition to pushing up gasoline prices, the Russia-Ukraine war, now in its second month, has led to a global surge in food prices as Russia and Ukraine are major exporters of commodities including wheat and sunflower oil.
“Frankly, given how uncertain conditions are at the moment, Lagarde’s caution can be justified, but it is fair to say that markets were expecting a bit more sprinkle after the eventful March meeting,” said Ima Sammani, FX market analyst at Monex Europe.
In late afternoon trading, the dollar index, which measures the greenback against six peers, rose 0.544% to 100.33 after earlier hitting 100.76, the highest level since April 2020.
The dollar extended gains after data showed U.S. retail sales increased in March, mostly boosted by higher gasoline and food prices.
The battered yen saw some respite, making a small recovery from a 20-year low hit against the dollar. In afternoon trading, it weakened 0.25% versus the greenback at 125.94 per dollar.
More than three-quarters of Japanese firms say the yen has declined to the point of being detrimental to their business, a Reuters poll found.
Other central banks tightened monetary policy, reinforcing expectations of higher interest rates globally.
The Bank of Korea surprised markets with a rate hike, while the Monetary Authority of Singapore also tightened policy, sending the Singapore dollar to its highest level since February.
On Wednesday, the Bank of Canada and the Reserve Bank of New Zealand both raised rates by 50 basis points, the largest hike for each in around 20 years. [CAD/]
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
