The euro held on to a 15-year high against the yen and edged higher against the dollar on Thursday, following hawkish comments from European policymakers and the prospect of falling energy prices.
Central bankers are back in the spotlight later in the day, with speeches scheduled from Federal Reserve Chairman Jerome Powell and Bank of England Chief Economist Huw Pill.
The single currency was firm at $1.0710 in Asian trade after the European Central Bank‘s chief economist said on Wednesday he had not seen enough progress in taming inflation.
The euro hovered near its highest level since 2008 at 161.73 yen, having broken out since the Bank of Japan left short-term interest rates on hold last week as investors see selling yen against the euro as safer than risking intervention in the dollar/yen. The euro is up 0.6% this week to 87.14 pence.
Ireland’s central bank chief Gabriel Makhlouf said on Wednesday that further rate hikes should not be ruled out, something the markets were not expecting, while Bundesbank President Joachim Nagel said the “last mile” to the inflation target could be the hardest.
“While the market has focused on the prospects of (G10 central bank) rate cuts next year, many of the respective central bankers have pushed back against this speculation,” said Rabobank senior strategist Jane Foley.
“As long as inflation remains above target, policymakers are likely to want to keep the risk of further tightening alive, especially as a significant drop in market rates could exacerbate inflation risks.”
The unloved yen failed to get much of a boost from a drop in U.S. Treasury yields, with the 10-year rate at its lowest since September as the yen weakened past 151 per dollar. It was last trading at 150.91.
Elsewhere, falling oil prices provided welcome relief in Europe but held back commodity-linked currencies such as the Australian, New Zealand and Canadian dollars.
The Australian dollar clawed back some of its overnight losses as the price of iron ore, Australia’s biggest export, hit a 16-month high on expectations of a rebound in demand from China. It was last up 0.2% at $0.6460.
In China, Reuters reported that authorities had asked Ping An Insurance Group to take a majority stake in troubled developer Country Garden. Ping An denied the report, but traders hoped it would signal support for the sector.
China’s yuan slipped on expectations of further interest rate cuts after data showed Chinese consumer prices fell in October.
China’s consumer prices fell in October, data showed on Thursday, fueling expectations for lower interest rates.
“There are some growing market expectations for further rate cuts by the Chinese central bank amid soft inflation prints and a still narrow economic recovery,” said Michael Wan, a currency analyst at MUFG in Singapore.
In the Middle East, Israeli forces battled Hamas militants at close range in Gaza City, but heavy dollar selling by the Bank of Israel helped push the shekel back to pre-war levels of 3.83 to the dollar.