The US dollar hit its lowest against the euro in over two weeks on Wednesday after the European Central Bank kept monetary policy steady despite recent market volatility and Bund yields extended their rise. The ECB sees no reason to adjust its monetary policy stance in response to a recent rise in bond yields in Europe, ECB President Mario Draghi told a news conference after the bank held interest rates as expected.
That sentiment from Draghi, in addition to the ECB raising its 2015 inflation forecast, helped boost the euro. Draghi and the ECB's statements came after data Tuesday showed a rise in euro-zone inflation in May. "Draghi's comments reaffirmed that the euro zone data was moving in the right direction," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.
The euro has also notched gains in the past two sessions by tracking a rise in Bund yields. Benchmark 10-year Bund yields hit 0.89 percent Wednesday, their highest since October 2014. The euro was last up 1.07 percent against the dollar at $1.12695 after hitting a more than two-week high of $1.12855, after posting its second biggest daily gain since October 2011 on Tuesday.
Comments from Federal Reserve board member Lael Brainard that the US economy's recent poor performance might be more than transitory also weighed on the dollar on Tuesday. Optimism about Greece's negotiations with creditors also supported the euro, analysts said. Greece's international creditors signaled on Wednesday they were ready to compromise to avert a default even as Athens warned it might skip an IMF loan repayment due this week.
The dollar rose slightly against the yen at 124.300 yen , and rose against the Swiss franc at 0.93480 franc after mixed US economic data. The dollar index, which measures the greenback against a basket of major currencies, was on track for a second straight losing session. ISM data showing the pace of growth in the US services sector slowed in May weighed on the dollar. Analysts said the data supported the view that the Federal Reserve may wait longer before hiking rates. Rate hikes are expected to boost the dollar by driving investment flows into the United States. "Anyone would agree that the US economy is not running at full steam," said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments. The dollar index was last down 0.51 percent at 95.342.
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