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Dollar jumps against yen

Tuesday, September 02 09:23:43

The dollar hit its highest since January against the yen on Tuesday while a struggling euro sank to a one-year low against the greenback on expectations of a more aggressive easing programme in the euro zone.

The European Central Bank will hold a policy meeting and news conference later this week, which will be closely watched for any signs that ECB President Mario Draghi is moving towards full-scale quantitative easing - effectively the printing of money - to boost the flailing euro zone economy.

Since Draghi said he would use "all the available instruments" to ward off the threat of deflation at a U.S. Federal Reserve conference in Jackson Hole last month, speculation that the ECB will introduce QE has ramped up.

Data added fuel to that speculation on Monday: euro zone factories barely increased prices last month, and manufacturing activity in France fell at the fastest pace in 15 months. A separate report confirmed the German economy contracted for the first time in over a year in the second quarter.

That all helped to send the euro to a trough of $1.3115 on trading platform EBS on Tuesday, its lowest since September 2013. But some said that the market might be expecting too much from Thursday's meeting.

"Ahead of the ECB I would be a little bit cautious on the euro because it looks like a lot is now priced in following Draghi's comments at Jackson Hole, and there's a risk that those market expectations of policy action are overdone," said Ian Stannard, head of European currency strategy at Morgan Stanley.

"If we do get the ECB not quite meeting those expectations then we could get the euro rebounding off the back of that (against the dollar) in the very near-term." (Reuters)

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