The US dollar rose for the first time in three weeks versus the euro as the US Federal Reserve refrained from additional asset buying, while extending its maturity-extension plan, trimming bets on debasing the US currency.
The euro depreciated against the greenback as German Chancellor Angela Merkel opposed direct bailout funding to address the bloc’s debt crisis.
The dollar added 0.5 percent this week to US$1.2570 per euro in New York. The shared currency rose 1.6 percent to ￥101.10, touching its highest point since May 22. Japan’s currency fell 2.2 percent to ￥80.43 per dollar, reaching the weakest level since May 2.
The yen weakened on speculation the Bank of Japan (BOJ) may expand monetary stimulus, a decision that would debase the currency. Japan’s parliament approved on Thursday the government’s nominees to the BOJ’s board, confirming two economists who have signaled support for monetary stimulus.
Japanese Finance Minister Jun Azumi pledged on June 1 to take “decisive action” to protect against “excessive moves” after the yen climbed to its highest level since February against the US dollar.
The difference between yields on Japanese and US two-year government securities has widened since June 4 and reached its highest level since April 5. US two-year yields exceed Japan’s similar maturity debt by 20 basis points, or 0.2 percentage point.
The US central bank said it would expand its so-called Operation Twist program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio, by US$267 billion through the end of the year.
The euro fell the most in five months against the dollar on Thursday as Moody’s Investors Service lowered credit ratings on 15 global banks, adding to concern Europe’s debt crisis is worsening.
The pound fell 0.9 percent to US$1.5581 this week and was little changed at ￡0.805 per euro.