TOKYO, June 15 ― The euro was headed today for its worst weekly loss in 19 months after a cautious European Central Bank signalled it will keep interest rates at record lows well into next year.
Following a closely-watched meeting yesterday, the ECB said it will end its massive bond purchase scheme by the end of this year, taking its biggest step yet toward dismantling crisis-era stimulus.
The euro briefly spiked to a one-month high of US$1.1853 (RM4.7243) following the announcement.
But euro bulls were soon in retreat as the ECB also indicated that it would keep interest rates steady at least through the summer of 2019, reflecting the uncertainties hanging over the euro zone economy.
The single currency slumped nearly 1.9 per cent yesterday, its largest one-day fall since Britain's Brexit vote shock of June 2016.
It stretched overnight losses to brush US$1.1560, lowest since May 30. The currency was down 1.7 per cent on the week, its worst weekly loss since November 2016.
"The euro showed such a big reaction to the ECB meeting as its stance came in sharp contrast to the Federal Reserve, which had struck a hawkish tone just the day before," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.
The Fed on Wednesday raised interest rates for the second time this year and indicated that it could tighten policy two more times in 2018.
"Instead of reacting immediately to the Fed, many in the market had opted to first see out the ECB meeting, considered the main event of the week. And they duly reacted," Ishikawa said.
The euro was a shade lower at ¥127.900 after dropping 1.7 per cent overnight.
The dollar was little changed at ¥110.620 after rising 0.25 per cent the previous day.
The greenback was up 1 per cent versus its Japanese peer on the week, during which it brushed a three-week peak of 110.850 after the Fed's policy announcement on Wednesday.
Few expected surprises from the Bank of Japan, which on Friday ends a two-day policy meeting at which it is widely expected to stand pat and maintain its massive easing scheme as the economy skirts with recession.
Against a broadly stronger dollar, the Australian dollar slipped 0.17 per cent to a one-month trough of US$0.7462.
The dollar index gained about 0.2 per cent to a two-week high of 94.973, after rallying more than 1 per cent yesterday. ― Reuters