News with Tags "Currencies"

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — The U.S. dollar slipped against the Japanese yen and the euro Wednesday, ahead of highly anticipated guidance from the U.S. Federal Reserve on what it plans to do with its bond-buying program.

The U.S. dollar /quotes/zigman/4868099/sampled USDJPY -0.0639%   bought 95.22 yen, down from ¥95.30 late Tuesday in North American trade.

The euro /quotes/zigman/4867933/sampled EURUSD +0.0114%  , meanwhile, inched back to $1.3391 from $1.3398. But with an intraday high of $1.3402, the euro had reached a level that was last seen in February, according to FactSet data.

The ICE dollar index /quotes/zigman/1652083 DXY -0.01%  , which tracks the greenback against six rivals, moved up to 80.674 from 80.640. The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX -0.01%  , which uses a slightly wider comparison basket, slipped fractionally to 72.66 from 72.67.

Fed Chairman Ben Bernanke was due to address reporters at the conclusion of the Fed’s policy meeting later Wednesday.

The dollar has been weaker recently on uncertainty over whether the Fed will decide to scale back the pace of its bond purchases, currently set at $85 billion a month, though some analysts have said the bond buying has generally weighed on the dollar. Read about how markets may react after the Fed decision.

The Fed’s purchases were more than doubled to $85 billion a month starting in January in a bid to stimulate economic activity, including encouraging job growth.

“In our view, the best way the Fed can boost confidence is by showing some themselves,” Wells Capital Management chief investment strategist Jim Paulsen said in a report late Tuesday.

“The unconventional and unprecedented actions of continuing to keep short-term interest rates at zero and persistently adding to excess bank reserves, while probably of little additional help to economic fundamentals, does chronically fuel a nagging fear of ‘what does the Fed know we don’t,’” he wrote.

“The ‘act of tapering’ and beginning the process of policy normalization would speak loudly about the Fed’s own confidence in the future of this economic recovery,” Paulsen said.

The British pound /quotes/zigman/4867886/sampled GBPUSD -0.0162%  slipped to $1.5632 from $1.5646 ahead of the Fed’s announcement as well as the release of minutes from the Bank of England’s policy meeting held earlier this month. The central bank decided to keep its key lending rate at 0.5%, and left the size of its own bond-buying program unchanged.

The Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.0026%  fell to 94.80 U.S. cents from 95.00 U.S. cents on Tuesday.

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By Saumya Vaishampayan and Carla Mozee, MarketWatch

NEW YORK (MarketWatch) — The U.S. dollar rose against most rivals on Tuesday, netting a second day of gains against the Japanese yen, as the Federal Open Market Committee prepared to kick off its two-day meeting.

The U.S. dollar /quotes/zigman/4868099/sampled USDJPY +1.1332%  exchanged hands at 95.40 yen in recent trade, higher than ¥94.56 late Monday.

The Fed’s interest-rating setting body is slated to begin meeting on Tuesday and release its policy decision on Wednesday.

Few market participants think the Fed could announce a change in its monthly asset purchases of $85 billion at this meeting, but the language used in the monetary policy statement about an eventual slowing could be important for the dollar. Congressional testimony from Fed Chairman Ben Bernanke in May, in which he said the Fed could taper those purchases in the next few meetings, led to a dollar rally. The Fed’s bond buys have been understood to weigh on the greenback.

Bernanke on Wednesday is likely to “reiterate his comments from his recent congressional testimony, including that purchases may be adjusted up or down, conditional on the incoming data and the Fed’s economic outlook,” Barclays wrote Monday.

“We remain neutral on the [dollar’s] near-term prospects in light of this uncertainty, but continue to selectively favor owning [dollar] volatility, given the sensitivity to changes in the tapering prospects,” the bank’s analysts wrote.

Another factor in the mix is the expiration of Bernanke’s second term as chairman at the end of January. President Barack Obama said in an interview with Charlie Rose that Bernanke has done an “outstanding job” as Fed chairman, but added Bernanke has “already stayed a lot longer than he wanted or he was supposed to.”

Data released Tuesday showed inflation remained benign. U.S. consumer prices rose by a seasonally adjusted 0.1% in May, compared with expectations of a 0.2% increase. But construction of new homes in the U.S. rose 6.8% last month to a seasonally adjusted annual rate of 914,000, less than economists had expected.

The dollar on Monday broke a four-day win streak for the yen, which had benefited from uncertainty about the Fed possibly slowing the pace of monthly bond purchases. The yen was also aided by the Bank of Japan’s June 11 decision not to expand its own stimulus efforts.

A Monday afternoon article in the Financial Times said Bernanke was likely to imply the Fed is close to slowing its monthly asset purchases, depending on economic figures.

The euro /quotes/zigman/4867933/sampled EURUSD +0.0922%  on Tuesday was slightly higher against the dollar, at $1.3387 compared with $1.3366 late Monday.

The ZEW economic-sentiment indicator in Germany rose 2.1 points to a print of 38.5 in June. Economists had expected a reading of 38.1.

The British pound /quotes/zigman/4867886/sampled GBPUSD -0.7684%  was lower, fetching $1.5609, compared with Monday’s level around $1.5721.

The ICE dollar index /quotes/zigman/1652083 DXY +0.07%  , which tracks the greenback against six rivals, rose to 80.708 from 80.619.

The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX +0.41%  , which uses a slightly wider comparison basket, was at 72.82, up from 72.49 on Monday.

The Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.9180%  traded at 94.75 U.S. cents, down from 95.63 cents late Monday.

The Reserve Bank of Australia is scheduled to meet on July 2. In the June 4 meeting, the bank held the cash rate at 2.75%, a record low, following an unexpected quarter-point cut in May aimed in part at bolstering the non-mining and energy sectors of the economy.

Interest-rate reductions can hurt a currency’s appeal among investors searching for relatively higher returns.

Given the weakness in underlying details of Australia’s national accounts and softer economic data from the country’s major trading partners since the June meeting, “we still see risks skewed toward easing,” RBC strategist Michael Turner wrote to clients Tuesday.

RBC expects the benchmark rate to be eventually cut to a low of 2.25%, including a quarter-percentage point reduction at the July 2 meeting.

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By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) -- A gauge of the U.S. dollar’s performance against key rivals edged higher Monday, coming off a string a losses before the Federal Reserve’s policy decision later this week.

The ICE dollar index /quotes/zigman/1652083 DXY +0.21%  , which tracks the greenback against six rivals, rose to 80.765 from 80.631 late Friday in North American trade.

The index had fallen in the previous five days, in part as the dollar dropped more than 3% against the yen last week. Investors unwound short bets made against the Japanese currency after the Bank of Japan last week opted not to expand its monetary-easing efforts.

The dollar /quotes/zigman/4868099/sampled USDJPY +0.6817%  on Monday bought ¥94.68, up from ¥94.16 on Friday.

The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX +0.22%  , which uses a slightly wider comparison basket, rose to 72.57 from 72.44.

Along with no action by the Bank of Japan, the dollar has been weighed by uncertainty about whether the Fed will curtail the pace of its bond purchases, set at $85 billion a month, directed at encouraging U.S. economic growth.

The Federal Open Market Committee, the Fed’s interest-rating setting body, is due to begin its meeting Tuesday and release its policy decision Wednesday.

While they see progress on the labor-market front, policy makers want to have additional supportive data before tapering the pace of purchases, Crédit Agricole’s chief economist for North America, Michael Carey, wrote to clients late last week.

The pace of the asset-purchase program, which includes the buying of $40 billion a month in mortgage-backed securities, will likely be held steady through the summer, said Carey, adding that the U.S. economic recovery should gain traction in the second half of this year.

“If we are correct, the FOMC will likely taper the monthly purchases amount, starting with a small $20 billion reduction to a $65 billion purchases rate, and assess the market reaction while continuing to monitor developments in the labor-market outlook,” Carey wrote.

But if there’s no pick up the economy and in jobs, then the Fed “would delay any tapering move or increase the flow rate of purchases if the employment data deteriorate badly or if disinflation becomes a more pressing concern,” he said.

The Wall Street Journal last week reported that the Fed, led by Chairman Ben Bernanke, will use this week’s meeting to try to calm fears that it’s moving closer to raising short-term interest rates and that its bond-buying program will end all at once.

Euro ticks lower

The euro /quotes/zigman/4867933/sampled EURUSD -0.1993%   on Monday slipped to $1.3325 from $1.3345 on Friday ahead of the summit of the Group of Eight major economies being held on Monday and Tuesday in Northern Ireland.

Euro-zone developments have been overshadowed by those in Japan and the U.S., but the currency market “may see some fireworks” this week with the release of Germany’s ZEW economic sentiment indicator and the preliminary reading of purchasing managers’ indexes, which will be the first June economic readings for the euro zone, said Brown Brothers Harriman.

The economic reports are due on Tuesday and Thursday, respectively.

“We do think that a strong euro is exactly what the euro zone does not need right now, not with officials maintaining the austerity path and the [European Central Bank] seemingly far away from taking any further stimulus action,” wrote BBH’s global currency team, headed by Marc Chandler.

“While the U.S. data has been disappointing, it still stands head-and-shoulders above what we are seeing in the euro zone,” they wrote.

The British pound /quotes/zigman/4867886/sampled GBPUSD -0.1866%  was at $1.5704, around the same level seen late Friday, and the Australian dollar /quotes/zigman/4867876/sampled AUDUSD +0.6020%   bought 96.12 U.S. cents, more than Friday’s level around 95.74 U.S. cents.

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By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — The U.S. dollar fell against the Japanese yen on Friday, but fought to stick around the ¥95 threshold.

The dollar /quotes/zigman/4868099/sampled USDJPY -0.0870%   bought ¥94.92, weaker than its level around ¥95.12 late Thursday in North America.

The dollar was sitting above ¥95 when equity trading got underway in Japan on Friday, with the weaker yen supporting strong share-price gains for exporters. This helped the broader Nikkei Stock Average /quotes/zigman/5986735 JP:NIK +3.38%  bounce back after Thursday’s tumble of more than 6%.

The dollar had spent most of Thursday’s session below ¥95 yen — even briefly stepping below ¥94 to hit its lowest level in two months.

For the week, the dollar was down about 2.5% against the yen, on track for a fourth straight week of declines.

The dollar in mid-May had charged up to ¥103, or a 4-1/2-year high, in the wake of the Bank of Japan’s April launch of monetary measures to stimulate economic growth and concerns the Federal Reserve might soon pare its bond-buying. But investors subsequently started unwinding bets that the yen would fall, in part due to a sharp retreat for Japanese equities.

The Japanese central bank’s measures included encouraging domestic investors to buy foreign bonds, which would help weaken the yen and aid the economy. But government data released Thursday showed Japanese investors continued to sell their overseas debt.

Minutes released Friday from the Bank of Japan’s meeting in May showed a few members believe there’s still room for them to take further policy action.

“Investors are aware of the Bank of Japan’s plans to remain a considerable presence in the market with asset purchases that are aimed to promote asset appreciation, devalue the yen and temper volatility. Yet, the central bank is fighting an uphill battle,” wrote DailyFX chief currency strategist John Kicklighter on Friday.

The Bank of Japan’s situation is “much more complicated than the [Federal Reserve’s],” because of a number of systematic issues, he wrote. “Chief among them is the specter of a general risk-aversion move from global capital markets.”

For its part, the Federal Reserve will use its next meeting to try to calm fears that it’s moving closer to raising short-term interest rates, according to a report by The Wall Street Journal on Thursday.

Officials were quoted as saying Fed Chairman Ben Bernanke would stress that any move to reduce the pace of the bond-buying program won’t mean that the Fed is close to ending the program.

Later Friday, the markets will assess reports on U.S. industrial production in May and a preliminary June reading of consumer sentiment.

May consumer-inflation figures from the euro zone were also due out later Friday. The euro /quotes/zigman/4867933/sampled EURUSD -0.2141%   slipped against the dollar ahead of the data, trading at $1.3354, down from $1.3365 on Thursday.

The British pound /quotes/zigman/4867886/sampled GBPUSD -0.1017%  was steady from Thursday’s level of $1.5708, and the Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.5086%  fetched 96.00 U.S. cents, less than 96.51 U.S. cents on Thursday.

The ICE dollar index /quotes/zigman/1652083 DXY +0.09%  , which tracks the greenback against six rivals, rose to 80.724 from 80.692, but was looking at a weekly decline of 1.2%.

The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX +0.16% , which uses a slightly wider comparison basket, rose to 72.57 from 72.55.

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By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — Japan’s currency climbed against the U.S. dollar Thursday following data showed Japanese investors continue to sell foreign debt and equity, while a gain for the Australian dollar after better-than-anticipated monthly data proved short-lived.

The dollar /quotes/zigman/4868099/sampled USDJPY -1.5858%  bought ¥94.71, down from ¥95.61 late Wednesday in North America, dropping below the ¥95 level for the first time since early April.

Thursday’s loss extended a rough week for the dollar against the yen, with the greenback dropping nearly 3% Tuesday on disappointment that Bank of Japan made no change to monetary policy at a time of volatility in Japanese stock and bond markets.

On Thursday, data from the Ministry of Finance showed Japanese investors sold a net ¥386.9 billion ($408.8 billion) of overseas debt and a net ¥221.8 billion of foreign stocks in the prior week.

The numbers extend a trend from last week, when Japanese investors sold another ¥1.17 trillion worth of foreign bonds, the largest amount since April 2012, BK Asset Management managing director Kathy Lien noted Wednesday.

“Without the Japanese shifting their funds abroad, the yen will have a very tough time falling,” she said.

The dollar/yen pair is moving closer to the level it stood just before the Bank of Japan’s April 4 announcement of a new monetary-easing plan aimed at bolstering domestic growth. The dollar had bought ¥92.90 ahead of the announcement, shooting up to ¥96.16 after the plan was unveiled.

Investors later Thursday will watch for U.S. retail-sales figures for May.

Retail sales are expected to rise 0.5% in May after a small 0.1% uptick in April, according to economists polled by MarketWatch.

“If the U.S. economy was on firmer footing, talk of tapering asset purchases could be positive for the dollar because the U.S. economy would be better equipped to handle a reduction in stimulus,” said Lien.

If the retail-sales report “shows that stronger job growth has translated into stronger consumer spending, the dollar could extend its recovery, lifting equities in the process,” she wrote.

Aussie gets brief ‘jobs bump’

The Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.3162%  rose as high as 95.21 U.S. cents after the Australian Bureau of Statistics said employment rose by 1,100 jobs in May, to nearly 11.7 million.

Economists polled by Dow Jones Newswires had expected, on average, a loss of 10,000 jobs last month.

The Aussie had been at 94.51 U.S. cents before the data were released, but the advance was short-lived, as the currency soon moved back down to 94.39 U.S. cents.

The unemployment rate on a seasonally adjusted basis remained at 5.5%, while economists were looking for a rise to 5.6%. May’s gains in jobs were due to a 6,400 rise in part-time jobs, while full-time positions fell by 5,300.

“The trend in the [unemployment rate] is still higher, though the monthly noise highlights the likelihood of a gradual move as growth shifts from the mining sector elsewhere and decelerates as a result,” RBC debt and currency strategist Michael Turner wrote after the May jobs report.

RBC recently said it expects the Reserve Bank of Australia to cut the policy interest rate by a quarter-point in July, and by the same amount during the fourth quarter. The rate now stands at a record low of 2.75%.

The May jobs figures did “detract marginally from that case, but as always, we warn of the noise in the labor-market data,” said Turner.

Meanwhile, the euro rose against the dollar /quotes/zigman/4867933/sampled EURUSD +0.1353%  to $1.3358 from $1.3334 late Wednesday, and the British pound /quotes/zigman/4867886/sampled GBPUSD +0.0160%  edged up to $1.5682 from $1.5678.

The ICE dollar index /quotes/zigman/1652083 DXY -0.25%  , which tracks the greenback against six rivals, fell to 80.719 from 80.914.

The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX -0.42%  , which uses a slightly wider comparison basket, fell to 72.64 from 72.91.

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By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — The U.S. dollar made a minor rise against the Japanese yen Wednesday, following the previous day’s rally for the Japanese currency after the Bank of Japan didn’t expand stimulus measures.

The dollar /quotes/zigman/4868099/sampled USDJPY +0.3840%  traded at ¥96.33, up from ¥96.22 late Tuesday in North America.

The buck was battered Tuesday, falling about 3% against the yen “following the Bank of Japan’s decision to hold its key policies in place while refusing to address recent volatility in bond and equity markets,” DailyFX currency analyst Christopher Vecchio told clients Tuesday.

There were market players that also wanted Japan’s central bank to extend the duration on its ultra-low-interest loans to banks. The yen’s surge got additional support from the Bank of Japan’s modestly more upbeat view on the economy, which has been battling deflation for years.

The dollar climbed above the ¥103 level in mid-May as the yen struggled on the back of the Bank of Japan’s April announcement that it would pump some $1.4 trillion into the economy to revive growth and push inflation up to a 2% target in the next two years.

Though off recent highs, the dollar is still up about 12% against the yen this year.

The Australian dollar /quotes/zigman/4867876/sampled AUDUSD +0.3440%  on Wednesday saw a small pickup against the U.S. dollar, trading at 94.54 U.S. cents compared with 94.46 U.S. cents on Tuesday. It had dropped to about 93.35 U.S. cents on Tuesday, marking its lowest level since mid-September 2010, according to FactSet data.

The Aussie has been “tormented in recent weeks by continuing downward revisions of Chinese growth, a resurgent U.S. dollar and a string of average domestic economics pointing to further [Reserve Bank of Australia] rate cuts,” CMC Markets premium-client manager Niall King said late Tuesday.

On Thursday, investors are due to get May figures on Australian employment, with economists expecting the economy to have lost 10,000 jobs last month, with the jobless rate moving up to 5.6% from 5.5%. In April, more than 50,000 new jobs were created.

The data “could prove a critical checkpoint for the Australian economy and its ailing currency,” said King. “Any sign of weakness here is bound to weigh heavily on the local dollar, while on the flip side, equity markets may cheer in the ensuing likelihood of further easing measures locally.”

The euro gained against the dollar /quotes/zigman/4867933/sampled EURUSD -0.0376%  , buying $1.3312 from $1.3305 Tuesday, and the British pound /quotes/zigman/4867886/sampled GBPUSD -0.0200%   rose to $1.5646 from $1.5634.

On Tuesday, Germany’s constitutional court began hearing debate on whether the European Central Bank’s Outright Monetary Transactions — a yet-to-be-used program to buy bonds from struggling euro-bloc nations — is allowable under German law. A ruling isn’t expected until later this year, however.

The ICE dollar index /quotes/zigman/1652083 DXY +0.10% , which tracks the greenback against six rivals — was little changed at 81.121. The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX +0.09% , which uses a slightly wider comparison basket, rose to 73.06 from 73.04.

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By Michael Kitchen, MarketWatch

LOS ANGELES (MarketWatch) — The dollar edged lower in early Tuesday trading, with the yen higher after Japan’s central bank offered no new easing moves in its latest policy decision.

The Japanese yen /quotes/zigman/4868099/sampled USDJPY -0.5627%  gained ground after the Bank of Japan disappointed some market participants who had wanted it to extend the duration on its ultra-low-interest loans to banks.

The dollar slumped following the decision, quickly dropping to ¥97.94 from ¥98.69 moments ahead of the decision. However, the greenback later pared its losses, rising back to ¥98.30, though still below its ¥98.64 level late Monday in North America.

While the dollar is still up more than 13% against the yen this year, it has come off significantly from its late-May highs above ¥103, which it made on expectations the Federal Reserve would soon begin paring back its aggressive bond-buying operations.

While the yen rose, the Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.4804%  went the other way, slipping to 94.25 U.S. cents from late Monday’s 94.59 U.S. cents, after a National Australia Bank survey out Tuesday showed business sentiment remained negative in May.

The Aussie has marched steadily lower in recent weeks, after having lost parity with the U.S. dollar in mid-May. But Crédit Agricole strategists said Tuesday that the currency is oversold and could soon rebound.

“Going forward, we expect [the Australian dollar’s] downside to become increasingly limited from current levels and advise against speculating on much more downside,” they wrote, citing improving risk sentiment as a factor in the currency’s favor.

The also said the Aussie could benefit from dashed hopes surrounding the Reserve Bank of Australia (RBA).

“Market expectations for two more interest-rate cuts by the RBA over the coming 12 months may prove excessive, unless domestic growth conditions weaken considerably further,” they said.

Meanwhile, the U.S. dollar traded broadly lower, given the rise in the yen and some of the European majors.

The ICE dollar index /quotes/zigman/1652083 DXY -0.16%  — which tracks the greenback against six rivals — fell to 81.548 from 81.667 late Monday, while the WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX -0.16%  — which uses a slightly wider comparison basket — dropped to 73.66 from 73.71.

Those moves came as the euro /quotes/zigman/4867933/sampled EURUSD +0.1319%  rose to $1.3271 from $1.3254, and the British pound /quotes/zigman/4867886/sampled GBPUSD +0.1080%  improved modestly to $1.5583 from $1.5571.

The euro’s advance came after European Central Bank President Mario Draghi sounded a somewhat hawkish tone, telling German state television that the central bank wouldn’t buy bonds from euro-zone members just to keep them solvent, Dow Jones Newswires reported.

He made the remarks as Germany’s constitutional court was set to debate whether the ECB’s Outright Monetary Transactions — a yet-to-be-used program to buy bonds from struggling euro-bloc nations — was allowable under German law.

In the interview, Draghi said that “the risks for German taxpayers are significantly lower today than they were a year ago,” according to Dow Jones Newswires.

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By Michael Kitchen, MarketWatch

LOS ANGELES (MarketWatch) — The Japanese yen slipped Monday, a day ahead of a central-bank decision, while lackluster Chinese economic data pushed the Australian dollar lower as well.

After falling below the ¥95 handle late last week, the dollar /quotes/zigman/4868099/sampled USDJPY +0.8969%  was back up at ¥98.25, solidly above its ¥97.44 level Friday afternoon in North America.

The yen’s losses came as the Bank of Japan kicked off its two-day meeting in Tokyo, with investors waiting to see whether the central bank would offer any further easing moves after standing pat at its previous gathering in late May.

Still, analysts at Crédit Agricole said the Bank of Japan decision may have less impact on the dollar-yen rate than what happens in the U.S. going forward.

“Some investors may hope for additional measures in order to ease market conditions. However, ultimately [the dollar’s rate against the yen] will also remain driven by conditions in the U.S.,” they wrote Monday

“Hence, decreasing uncertainty about the [Federal Reserve’s] monetary-policy stance, combined with stable risk sentiment, is needed in order to drive the pair higher once again,” they wrote.

The dollar managed to breach the ¥103 mark in May before beginning its march to the lows seen last week following disappointment over a slate of reform policies from Japanese Prime Minister Shinzo Abe.

However, Abe’s announcement Sunday that he planned to roll out “drastic” tax cuts for corporate investment this fall got a better reception, helping drive the yen lower and Japanese stocks sharply higher.

Australia’s currency also lost ground Monday, with the Aussie dollar /quotes/zigman/4867876/sampled AUDUSD +0.3125%  dropping to 94.12 U.S. cents from late Friday’s 94.97 U.S. cents.

The decline — extending recent weakness for the Australian dollar — came after China released a slate of data over the weekend showing a mild slowdown in growth and a much softer gain in exports than had been forecast.

China is a major buyer of Australian exports, making the Aussie especially sensitive to the Chinese economic outlook.

Meanwhile, the euro /quotes/zigman/4867933/sampled EURUSD +0.2707%  fell back below the $1.32 level, buying $1.3194, down from $1.3217 at the end of the previous week.

The Crédit Agricole analysts said that while the euro got a boost from a lack of dovish talk last week by European Central Bank President Mario Draghi, a subsequent hit to risk sentiment among euro-zone investors dragged on the currency.

If euro-based assets underperform, it could send capital moving out of the currency, they wrote, and “it may be difficult for the [euro] to appreciate even further, solely based on monetary-policy expectations.”

“This is especially true if the risk-assets-related capital-flow situation starts to turn against the single currency once again. Accordingly, we continue to believe that [the euro’s] levels around the upper end of the last few months’ range will prove unsustainable,” they wrote.

The British pound /quotes/zigman/4867886/sampled GBPUSD +0.0437%  also sat lower in Monday trade, buying $1.5523, easing from $1.5553 late Friday.

And with the currency majors mostly lower, gauges of the U.S. dollar ticked upward, with the ICE dollar index /quotes/zigman/1652083 DXY +0.17%  — measuring the greenback against six rivals — rising to 81.844 from 81.657.

The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX +0.37%  — which uses a slightly larger comparison basket than the ICE — advanced to 73.82 from 73.58.

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By William L. Watts and Saumya Vaishampayan, MarketWatch

NEW YORK (MarketWatch) — The U.S. dollar plunged Thursday, posting a huge loss versus the Japanese yen in three years and tumbling versus the euro after European Central Bank President Mario Draghi indicated further monetary easing was on the back burner.

The dollar was also hurt as expectations the Federal Reserve would soon move to taper bond purchases faded.

The ICE dollar index /quotes/zigman/1652083 DXY -1.26% , a gauge that measures the greenback’s performance against six other currencies, fell to 81.531, down from 82.561in North American trade late Wednesday. The index’s 1.3% fall is its biggest one-day percentage decline since June 29 of last year, according to FactSet.

The selloff was extended as leveraged and model funds took advantage of a break in technical support for the index, said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange.

The dollar/yen currency pair sharply extended its recent retreat from a four-year high, posting its biggest one day loss since Japan’s Fukashima earthquake in March 2010, noted Christopher Vecchio, currency analyst at DailyFX.

The dollar dived as low as 95.88 yen. It trimmed that loss to change hands in recent trade at ¥97.07, but remained down sharply from around ¥99.16 late Wednesday.

“After the ECB’s news conference, in which President Mario Draghi made it clear that the move to negative deposit rates would remain on the back burner, investors found renewed faith in the euro, and thus began a brutal day of [dollar[ selling across the board,” Vecchio said.

Pressure on the dollar was compounded a recent string of weaker-than-expected U.S. economic data “leading general market sentiment to agree that QE3 will remain in place for the foreseeable future,” he said in a note.

The euro /quotes/zigman/4867933/sampled EURUSD +1.1598% traded at $1.3243 in recent action, up from around $1.3094 late Wednesday in North America and up from around $1.3140 before the start of Draghi’s monthly news conference.

The ECB held its main lending rate at a record low 0.5% in a widely expected move, where it was left last month after a quarter-point cut.

The central bank’s staff also cut their 2013 growth forecast but raised marginally their outlook for 2014.

While the council also discussed a negative rate on deposits and stands ready to implement the measure, Draghi noted the unintended consequences of negative rates. Read a recap of the news conference here.

Draghi’s remarks indicate a move to a negative deposit rate, which would be aimed in part at forcing banks to boost lending activity, isn’t imminent, Borthwick said.

“Remember that last month the market was convinced that the ECB would move to negative interest rates, and [that] the Fed was ready to begin tapering. The market was thus positioned accordingly. However, neither scenario has been realized, in fact both hopes have been dashed,” Borthwick said.

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By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) -- Australia’s currency rose Wednesday, bouncing back from initial losses spurred by Australian economic growth figures that missed analyst expectations.

The Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.4344%  traded at 96.44 U.S. cents, a jump from its intraday low of 96.04 U.S. cents hit after first-quarter gross domestic product in Australia showed growth of 0.6%, missing a Dow Jones Newswires consensus forecast of 0.7% growth.

The Aussie had traded at 96.33 U.S. cents ahead of the release, around the same level seen late Tuesday in North America.

The Australian economy expanded 2.5% in the first quarter on a seasonally adjusted year-on-year basis, missing the 2.7% consensus forecast.

Australia’s currency last month fell below parity against the U.S. dollar on concerns about domestic economic weakness, with mining investment in Australia expected to peak this year.

Also of concern have been indications of a slowdown in China, Australia’s top export market, with the most recent signal coming from an HSBC gauge showing contraction in the manufacturing sector.

Reserve Bank of Australia Gov. Glenn Stevens said Tuesday that Australia’s economic growth remained “below trend” and would likely stay that way for the near term. The central bank on Tuesday kept its key policy cash rate at 2.75%, but with inflation currently subdued, it also said there’s some scope for further easing in monetary policy.

The suggestion by policy makers that they’re keeping the door open to interest-rate cuts pushed the Aussie lower on Tuesday. A cut in the benchmark interest rate could further hurt the Australian dollar, as rate reductions tend to depress debt yields in the currency.

The Aussie on Wednesday also fell against the Japanese yen /quotes/zigman/4868089/sampled AUDJPY -0.9203% , buying ¥96.27 compared with ¥96.55, after the Australian GDP report.

Against the yen, the U.S. dollar /quotes/zigman/4868099/sampled USDJPY -0.5016%  traded at ¥100.16, roughly the same level from late Tuesday, while the euro /quotes/zigman/4868097/sampled EURJPY -0.3975%  fetched ¥130.92 compared with ¥129.73, ahead of a scheduled speech Wednesday by Japanese Prime Minister Shinzo Abe outlining new economic-growth policies.

The euro /quotes/zigman/4867933/sampled EURUSD +0.1066%  rose against the greenback, changing hands at $1.3083 versus $1.3077. The European Central Bank’s meeting is slated for Thursday in Frankfurt. The ECB cut its benchmark interest rate by a quarter-percentage-point to 0.5% at its May meeting.

The British pound /quotes/zigman/4867886/sampled GBPUSD +0.1514% edged up against the U.S. dollar to $1.5311 from $1.5305.

The ICE dollar index /quotes/zigman/1652083 DXY -0.14% , a gauge that measures the greenback’s performance against six other currencies, fell to 82.748 from 82.803 on Tuesday.

The WSJ Dollar Index /quotes/zigman/9625991 XX:BUXX -0.16% , a rival measure that tracks the buck against a larger basket of currencies, was unchanged at 74.50.

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