The euro slid to a nine-year low against the dollar on Wednesday as investors braced for inflation data that should give doves at the European Central Bank a clear mandate for bolder policy stimulus. The common currency sank as deep as $1.1842, its lowest since March 2006. Traders said some sell stops were triggered after the currency broke below Monday’s trough of $1.1861.
The dollar, meanwhile, trimmed some losses against the safe-haven yen amid a slight lull in the recent flight-to-quality bids. Tokyo’s Nikkei edged up after posting its biggest fall in 10 months the previous day and other Asian bourses also posted modest gains. After slipping as low as 118.05 yen overnight, the dollar last traded at 119.12 yen, up 0.6 percent on the day. Still, the dollar remained far from its 9-year peak of 121.86 hit last month as persistent weakness in oil prices and the prospect of deflation in Europe have continued to fuel investor demand for government bonds like U.S. Treasuries. The Japanese 10-year yield has also dropped in the wake of the heightened risk aversion, reaching a new record low of 0.265 percent on Wednesday.
A standout performer was the New Zealand dollar, which rose broadly after international milk prices climbed again at a fortnightly auction, in part because of supply concerns. The currency of the world’s largest dairy exporting country rose to $0.7808, pulling well away from Monday’s low of $0.7619. It has since trimmed its gains and was last $0.7751. The kiwi also rallied against its Australian peer, which slid as far as NZ$1.0383 to an all-time low. The Aussie last traded at NZ$1.0404.
Read the full report: FX Daily