* Euro at day's low below $1.46; ECB signals no June hike
* Euro stages biggest daily slide vs dollar since November
* Weaker U.S. growth feeds aversion to risk
* Yen rises to highest level since March intervention
* Low U.S. rates, fiscal woes still dollar negatives
(Updates prices, adds comment, detail)
By Steven C. Johnson
NEW YORK, May 5 The euro headed for its biggest
slide against the dollar since November on Thursday after the
European Central Bank hinted interest rates were unlikely to
rise next month, short-circuiting a rally that had driven the
currency to a 17-month high.
The signal by ECB President Jean-Claude Trichet on rates
added to a growing sense of risk aversion in markets, sparked
by signs of slower growth in the United States and some other
developed economies, and spurred traders to bail out of
high-yielding currencies and commodities.
The dollar and yen were the main beneficiaries, as record
low interest rates made it profitable to borrow in those two
currencies at no cost to finance more lucrative investments.
The euro fell as low as $1.4581 EUR= before easing to
$1.4604. It was still well off Wednesday's 17-month high of
$1.4939 and was headed for its worst day since last November.
A sharp fall in the price of oil this week has taken the
edge off inflation concerns, muting expectations for higher
interest rates as the high energy cost weighs on consumers.
The price of U.S. crude oil has lost some 9 percent since
hitting $114 CLc1 on Monday, its highest level since 2008.
"The story across the board is the Western consumer is
being hit by high energy costs, irrespective of whether his
currency is weak or strong," said Boris Schlossberg, head of
research at GFT Forex.
An eight-month high in initial U.S. jobless claims reported
on Thursday and weak U.S. service data suggest as much, as do
weaker retail and industrial reports in Australia and Germany,
For more, see [ID:nN05259672] and [ID:nL3E7G400W] and
The euro also fell against the yen, down 2 percent to
117.05 yen EURJPY=, while the dollar fell below 80 yen for
the first time since March 18, the day major central banks
intervened to weaken the Japanese currency after it hit a
record high. JPY=
The strengthening of the yen prompted some traders to warn
that a second round of intervention could be on the cards.
Japan's finance minister said authorities were monitoring the
market but added the yen move appears different from the one
that triggered the March intervention. [ID:nP9E7ET00K]
U.S. government bonds rose and the dollar gained 1.2
percent against six major currencies after plumbing a
three-year low on Wednesday. .DXY
TRICHET TREADS LIGHTLY
High energy prices have stoked inflation in Europe and
other economies and prompted the ECB to hike rates in April for
the first time since 2008. That helped boost the euro, up 9
percent against the dollar this year.
But Trichet on Thursday suggested rates were unlikely to
rise next month as some investors had expected, though he left
the door open to a hike in July.[ID:nLDE7440GG]
Some said the moves on Thursday were overdone. Recent weak
U.S. economic data "merely validates our structural view on
U.S. growth: supertanker-slow but persistent progress," said
Dan Dorrow, head of research at Faros Trading. "Markets expect
more acceleration, but the U.S. will lag others for a long
time," which should dampen demand for dollars.
Indeed, analysts still expect the ECB to raise rates more
rapidly than the Federal Reserve, which is seen holding U.S.
borrowing costs at record lows until at least mid-2012.
Persistent worries about a yawning U.S. budget deficit should
also make it hard for the dollar to stage an extended rally.
"The euro is in an uptrend and I see no particular reason
to be turning negative here," said Adrian Schmidt, currency
strategist at Lloyds Banking Group.
But Schlossberg said a continued slide in oil prices could
alter the outlook.
"Trichet's overall tone is still pretty hawkish and there's
little doubt they've abandoned their tightening policy, and
that favors the euro in the medium term," he said. "But they
have paused, and if oil falls and stays below $100 a barrel,
that might relieve some of the price pressures they face."
The slide in commodities hurt currencies from commodity
exporters such as the Canadian and Australian dollars. The
latter fell to $1.0650 AUD=D4 after rising above $1.10
earlier this week, its highest level in nearly 30 years.
(Additional reporting by Nick Olivari in New York and Jessica
Mortimer in London; Editing by Leslie Adler)