The euro rose to the maximum level this year against the yen and traded
near a two-week peak against the dollar as market increased bets the
ECB will raise rates this year.
The euro has appreciated 2.8% versus the yen and 2.3 percent against the dollar since June 5, when ECB President Jean-Claude Trichet signaled interest rates may rise next month to quell inflation.
The U.S. currency touched the lowest in almost two weeks versus the
euro after a government report June 6 showed the U.S. unemployment rate
climbed the most in two decades.
``The euro is gaining in the context of the rhetoric differential
between the European Central Bank and the Fed,'' said Daragh Maher, a
London-based currency strategist for Calyon, the investment-banking arm
of Credit Agricole SA. ``The ECB is much more strident than the Fed,
which has said it will stop easing. That's very different from saying
you're about to hike.''
An interest-rate increase next month is ``possible,'' Trichet said in
Frankfurt last week. It was a message that the markets have understood
``quite well,'' ECB council member Nout Wellink, who also heads the
Dutch central bank, was quoted as saying in an interview with market
News International.
Inflation in the euro region is running at the fastest pace in 16
years. The ECB will lift the key rate twice this year, taking it to 4.5
percent by year-end, according to interest-rate futures trading.
``Unlike the Fed, the ECB can raise rates one or two more times due to
the strength of their region's economy,'' said Tetsuhisa Hayashi, chief
manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ
Ltd. in Tokyo. ``I am a dollar bear.''
Trichet will speak at a forum in Paris at 16:30 GMT.
The yen fell against every major counterpart today after a government
report showed Japan's longest postwar expansion may be over.
Gains in the dollar against the yen may be limited by speculation an
U.S. industry report today will show the worst housing slump in a
quarter century is weighing on the world's biggest economy.
The National Association of Realtors will today report pending home
resales fell 0.5 percent in April after a 1 percent decline in March, a
Bloomberg News survey of economists showed.