FOREX-Euro jumps vs yen, hits 2014 high vs sagging dollar

Thu Mar 6, 2014 3:56pm EST

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By Michael Connor

NEW YORK, March 6 (Reuters) - The euro jumped against the dollar on Thursday to highs last touched in December and to a peak against the yen unmatched since January after European policymakers signaled no need for new economic stimulus.

The European Central Bank left interest rates unchanged on Thursday and ECB President Mario Draghi told a news conference that economic conditions in the region did not require shifts in monetary policy, including some that may have driven currency trading away from the euro.

"The lack of any form of easing or action from the ECB helped the euro because it suggests that the economy is on track," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.

The euro rose during Draghi's news conference and later climbed further to $1.3873 before settling back to $1.3861, for a 0.9 percent rise on the day. That peak was its highest since Dec. 27.

The European common currency also gained sharply against the yen, settling with a 1.6 percent gain at 142.790 yen after touching a high of 142.910 yen, which was its highest since Jan. 16. The dollar ended up 0.72 percent at 103.040 yen .

The greenback got no lift in currency markets from encouraging jobless claims data from Washington showing a three-month low. The dollar index, which weighs the dollar against a basket of major currencies, fell to a 2014 low of 79.59 before climbing back to 79.642, for a decline for the day of 0.58 percent.

"We expect that the greenback may remain on the defensive in the near term," Wells Fargo Securities currency strategist Eric Viloria said in a commentary. "The focus should soon return to the outlook for Fed policy with the release of U.S. employment data tomorrow."

With the ECB holding rates steady on Thursday, some bets of a cut in base rates to support euro zone growth and weaken returns on the single currency against its peers were shaken out.

"The economy is getting healthier there. That's usually not the reason for stimulative measures," said Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management in Portland, Oregon. "I understand their reasons for no additional stimulus."

The euro has performed robustly against the dollar so far this year, confounding predictions by many banks it would fall on the prospect of further loosening by the ECB at a time when the Federal Reserve is going in the opposite direction.

Vail said she considers consensus forecasts of about 150,000 in U.S. job gains in Friday's monthly employment reports as overly optimistic.

But she added that the data were unlikely to prompt near-term action by the Fed, which is widely expected to continue with its throttling back of a monthly bond-buying program, now at $65 billion.

"I don't think it will affect the Fed's tapering," she said.

AUSSIE RETURN?

The Australian dollar earlier spiked to a nine-day high after upbeat retail sales and trade data and climbed higher during North American trading.

It has gained sharply since bottoming out in January after a sustained campaign by the Reserve Bank of Australia to weaken the currency.

The Aussie's fall was one of the dependable plays of late 2013 but the central bank changed its tune on the currency last month as more signs emerged that growth was improving.

On Thursday, the Aussie gained 1.2 percent to $0.90935 but had earlier touched a nearly two-month peak of 0.9112 set on Dec. 11.

Major currency markets, meanwhile, have been largely resistant to the geopolitical tensions stemming from the standoff between Russia and Ukraine.

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