Euro Reaches 2-Month High Versus Yen as Draghi Sets Bond Buying

The euro rose to the strongest in two months against the yen after the European Central Bank President Mario Draghi announced a bond-purchase plan to cap borrowing costs in the area’s most-indebted nations.

The dollar fell against higher-yielding currencies before a report tomorrow that may show the pace of hiring in the U.S. slowed in August, adding to evidence the Federal Reserve will initiate a third round of bond purchases. The 17-nation euro weakened earlier against the U.S. currency after the ECB forecast a deeper economic contraction this year. Sweden’s krona weakened after the central bank cut interest rates.

“The clarification today is helping to reduce the tail risk that we will have another intensification of the crisis,” said Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York. “That means that we’ve probably seen the worst in the short-term for the euro dollar. That doesn’t mean that it won’t continue to fall over time because we still have a lot more event risk coming up.”

via Bloomberg

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