Euro hits session lows against the dollar
Frankfurt (Oct 9) The euro hit session lows against the dollar on Thursday, after European Central Bank president Mario Draghi delivered comments on the euro zone economy.
The common currency last remained below $1.27. The euro had been firm at at two-week high against the dollar earlier.
During his comments, Draghi said euro zone inflation is likely to gradually accelerate towards the European Central Bank's target of below, but close to 2 percent by 2016 or 2017.
Euro zone inflation was at 0.3 percent year-on-year in September.
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The dollar dropped to a three-week low against the yen as investors pared back bullish bets on the greenback after minutes of the Federal Reserve's latest meeting on Wednesday prompted investors to push out expectations for the timing of an interest rate rise.
U.S. Treasury yields and implied rates on Fed fund futures retreated sharply after the Fed's minutes, with the market not seeing any appreciable rise in the Fed's target rate until around September 2015, from June 2015 previously.
Still many still believe the dollar will resume its rally after this latest pullback, as the U.S. economy remained on a stable growth path.
In the meantime, the U.S. labor market continued to stabilize as the number of Americans filing new claims for unemployment benefits fell last week to nearly its lowest since before the 2007-09 recession. Data from the U.S. Labor Department on Thursday showed initial claims for state unemployment benefits dropped 1,000 to a seasonally adjusted 287,000 in the week ended Oct. 4..
The dollar, which has a strong correlation with U.S. yields and rate expectations, fell 0.2 percent to 107.83 yen, trimming losses after the jobless claims data. It earlier fell to 107.53 yen, its lowest since mid-September.
The dollar index, which measures the greenback against six major currencies, also slid to 84.937, its lowest in two weeks, and was last flat at 85.321.
With the dollar coming under pressure, the euro rose to $1.2791, its highest level in two weeks, and nearly three cents above a two-year trough near $1.2500 set last week. The euro last traded flat on the day at $1.2726.
Analysts also cited the Fed's concern about the recent rally in the greenback, which might slow the gradual increase in inflation towards the Fed's 2 percent goal.
The Fed's surprise mention of the dollar's strength has prompted investors to stay cautious about buying the greenback at dips and triggered talk of a currency war. The euro zone, Japan and now the United States all seem keen to keep their currencies weak to bolster exports and growth, analysts said.