The
euro rose from an eight-week low against the dollar after European
Central Bank President Jean- Claude Trichet said inflation remains the
bank's top priority, signaling policy makers won't cut interest rates
soon.
Inflation will stay high ``for a rather
protracted period,'' Trichet said at a press conference in Athens
following the ECB's decision to keep its main refinancing rate at 4
percent today. The yen rose against all of the major currencies on
concern slowing global growth will prompt investors to sell
higher-yielding holdings funded in Japan.
``The ECB's
hawkish stance is still moderately bullish for the euro,'' said Dustin
Reid, a senior currency strategist at ABN Amro Bank NV in Chicago.
``The ECB is in no rush to cut rates.
The region's
15-nation currency has gained 5.6 percent against the dollar this year.
The yen rose 0.8 percent to 103.93 versus the U.S. currency, from
104.73 yesterday. It was up 0.6 percent to 160.20 against the euro,
from 161.23.
``There's renewed worry that global growth
just might not hold up,'' said Samarjit Shankar, director of global
strategy for the foreign-exchange group in Boston at Bank of New York
Mellon, the world's largest custodial bank, with more than $20 trillion
in assets under administration. ``The euro zone is slowing down, while
the ECB sticks to its hawkish tone.''
The pound was
little changed against the dollar after the Bank of England kept its
lending target at 5 percent. Sterling bought $1.9541, compared with
$1.9539 yesterday.
The ECB has held interest rates at a
six-year high to curb inflation. Consumer prices in the 15 countries
that share the euro rose 3.3 percent last month from a year earlier
after increasing 3.6 percent in March, the most in almost 16 years. The
ECB, which aims to keep inflation just below 2 percent, has left rates
unchanged since June of last year.
``The economic
fundamentals of the euro area are sound, with ``moderate but ongoing
GDP growth,'' Trichet said after the rate decision. ``However, the
level of uncertainty resulting from the turmoil remains unusually
high.''
The European Union reported yesterday that
retail sales declined 1.6 percent in March from a year earlier, the
biggest drop since the data began in 1995. The region's common currency
has fallen 3.9 percent against the dollar since rising to a record
$1.6019 on April 22.
``If the ECB begins easing to help
support growth, the markets will focus on the narrowing interest
differentials and sell off the euro,'' said Paresh Upadhyaya, a
portfolio manager who helps oversee about $50 billion in currency
assets at Putnam Investments in Boston. ``If inflation stays high and
the economic data weaken, the euro also sells off.''