* ECB's Draghi pledges action to anchor inflation
* BOJ's Kuroda says committed to aggressive stimulus
* Yellen sounds hawkish in comparison, lifting dollar
* US 2-year yields post biggest weekly gain in 14 months
By Wayne Cole
SYDNEY, Aug 25 The dollar marched higher against
the euro and yen on Monday as investors wagered that interest
rates were set on a diverging course in the United States,
Europe and Japan, giving a lift to Tokyo stocks in the process.
Pledges of policy stimulus from the heads of the European
Central Bank and the Bank of Japan pressured both the euro and
the yen, leaving the U.S. dollar as the winner by default.
The common currency skidded as far as $1.3185, from
around $1.3246 late in New York on Friday, while the dollar was
up at 104.20 yen and near a seven-month peak.
The euro also lost ground against many other currencies,
notably hitting a near 10-month low on the Australian dollar at
The yen's fall was taken as positive for Japanese exports
and corporate earnings and helped both the Topix and the
Nikkei nudge up 0.3 percent. Moves elsewhere where muted
and MSCI's broadest index of Asia-Pacific shares outside Japan
eased 0.1 percent.
The action in currencies came after ECB President Mario
Draghi said the bank was prepared to respond with all its
"available" tools should inflation drop further.
Data due out on Friday are expected to show annual inflation
slowed to just 0.3 percent in August from 0.4 percent in July,
further distant from the EBC's target of nearer 2 percent.
In stronger language than usual, Draghi emphasised that
inflation expectations were showing significant declines and
noted a lower euro would help support domestic demand, possibly
through fewer imports and greater consumption of locally-made
"Draghi departed from the script originally published on the
ECB's website on delivery, adding a section on inflation
expectations during August," said Ray Attrill, global co-head of
FX strategy at National Australia Bank.
"He noted a decline in short, medium and longer term
inflation expectations and indicated this would be acknowledged
at the Sept meeting. So it looks like more easing ahead..."
Also sounding dovish was Bank of Japan Governor Haruhiko
Kuroda who vowed to press ahead with aggressive monetary easing
for as long as needed to convince the public that deflation was
dead and buried.
U.S. SHORT-TERM YIELDS RISE
All of which made Federal Reserve Chair Janet Yellen's
balanced take on the U.S. labour market sound positively hawkish
As a result, Fed funds futures fell back <0#FF:> as the
market priced in the risk of an earlier lift-off for rates.
Yields on two-year Treasury paper climbed over
8 basis points for the week, the largest such rise since June
last year, while the yield curve flattened markedly.
That in turn fattened the premium offered by U.S. debt over
euro zone paper and helped the U.S. dollar outperform broadly.
The dollar index rose to 82.563, its highest since
September last year.
Wall Street was quiet in comparison with the Dow
ending Friday down 0.22 percent, while the S&P 500 lost
0.2 percent and the Nasdaq edged up 0.14 percent.
European shares had dipped 0.27 percent after a
Russian convoy of aid trucks entered eastern Ukraine without
In commodities trading, the rising dollar pressured prices
with spot gold slipping to $1,276.99 an ounce, not far
from last week's trough of $1,273.96.
Oil remained under pressure from plentiful supplies and
October Brent crude eased 29 cents to $102.00 a barrel.
U.S. crude lost 24 cents to $93.41 a barrel.
(Editing by Eric Meijer)