The euro rose to two-week high against the yen after Germany’s Bundesbank said the European Central Bank’s pledge to keep borrowing costs low doesn’t rule out higher interest rates to curb inflation.
The single currency advanced versus most of its 16 major counterparts as Germany’s central bank said in its monthly report that forward guidance “doesn’t rule out an increase in the benchmark rate if greater inflation pressure emerges.” The yen weakened for a second day against the dollar as Japan reported a trade deficit. India’s rupee slumped to a record as the nation’s stocks slid.
“The euro is trading higher on the back of those comments,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said in a telephone interview. “It reintroduces the possibility that, should inflation pressures re-emerge, the ECB’s forward guidance could be replaced with something a bit less dovish.”
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