Euro gains, hits 15-year peak vs yen, after ECB raises rates By Reuters

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The euro hit a 15-year peak against the yen and a fresh four-week high against the dollar on Thursday after the European Central Bank raised interest rates and signalled further tightening to bring euro zone inflation to its medium-term target of 2%.

The ECB lifted rates by 25 basis points, as expected, its eighth successive increase, to 3.5%, the highest in 22 years.

Its staff have also increased their forecasts for inflation excluding energy and food, especially for this year and next, owing to past upward surprises. The inflation projection for this year was raised to 5.1% from 4.6%.

“It’s a hawkish surprise as the inflation forecasts were revised higher by more-than-expected, for core in particular. That’s an indication of further tightening to come in the ECB’s outlook,” said Sebastian Vismara, global macro economist and strategist, at BNY Mellon (NYSE:) investment management in London.

“Euro is appreciating and short rates have moved higher so there’s a bit more hawkishness in the front end of the curve. The market is interpreting this as hawkish, not necessarily the hike itself, but what it’s communicating in terms of the outlook,” he added.

In mid-morning U.S. trading, the euro was last up 0.5% at $1.0894 after earlier touching a four-week high of $1.0881. Against the yen, the euro rose 0.8% to 152.97, hitting 153.39 yen, the highest since September 2008, following the ECB decision.

The ECB move came a day after the Federal Reserve left interest rates unchanged but signalled further rate hikes to come this year

The Fed’s policy decision snapped a string of 10 consecutive rate hikes, but the projections, or dot plot, showed policymakers expect two more increases by the end of 2023. Chair Jerome Powell said rate cuts in 2023 would not be appropriate.

“Fed delivered a hawkish skip,” said Mohit Kumar, chief financial economist Europe at Jefferies.

“The revision to the dot plots was more hawkish than our expectations as we had expected an upgrade to reflect one more possible hike.”

The , which measures the currency against a basket of other major currencies, was last down 0.2% at 102.76.

The dollar briefly trimmed losses after data showed U.S. retail sales unexpectedly rose in May, increasing 0.3% last month after rising 0.4% in April. Economists polled by Reuters had forecast sales slipping 0.1%.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits unchanged at a seasonally adjusted 262,0000 for the week ended June 10. Economists polled by Reuters had forecast 249,000 claims for the latest week.

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Currency bid prices at 9:34AM (1334 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.6700 102.9300 -0.24% -0.792% +103.3800 +102.6500

Euro/Dollar $1.0887 $1.0832 +0.49% +1.59% +$1.0894 +$1.0804

Dollar/Yen 140.5400 140.1050 +0.31% +7.19% +141.5000 +139.9450

Euro/Yen 153.03 151.73 +0.86% +9.07% +153.3900 +151.6700

Dollar/Swiss 0.8974 0.9012 -0.35% -2.88% +0.9056 +0.8974

Sterling/Dollar $1.2690 $1.2661 +0.25% +4.95% +$1.2694 +$1.2632

Dollar/Canadian 1.3316 1.3324 -0.05% -1.71% +1.3354 +1.3309

Aussie/Dollar $0.6829 $0.6796 +0.51% +0.20% +$0.6830 +$0.6769

Euro/Swiss 0.9769 0.9760 +0.09% -1.27% +0.9789 +0.9756

Euro/Sterling 0.8577 0.8555 +0.26% -3.02% +0.8591 +0.8544

NZ $0.6193 $0.6209 -0.35% -2.55% +$0.6217 +$0.6158

Dollar/Dollar

Dollar/Norway 10.5460 10.6400 -0.39% +8.00% +10.7340 +10.5920

Euro/Norway 11.4792 11.5227 -0.38% +9.44% +11.6096 +11.4737

Dollar/Sweden 10.6640 10.7173 +0.14% +2.46% +10.7692 +10.6583

Euro/Sweden 11.6109 11.5952 +0.14% +4.14% +11.6608 +11.5904