Euro Falls Versus Yen Amid ECB Easing Speculation

Euro currency

The euro weakened from the strongest in a month against the yen after European Central Bank President Mario Draghi reiterated a willingness to add stimulus if the risk of deflation increases.

The shared currency fell before a euro-area report that economists say will confirm consumer-price inflation was less than half the ECB’s target of just under 2 percent last month. The yen strengthened as Chinese shares slumped, boosting demand for the relative safety of Japan’s currency.

“I see a decline in the euro given the ECB is more likely to ease,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which helps clients make bets on currency moves using borrowed money. “Unless there’s additional easing, inflation will continue to slow.”

The euro dropped 0.1 percent to 140.80 yen at 8:35 a.m. London time after rising to 141.27 on Feb. 21, the highest level since Jan. 24. The common currency was little changed at $1.3749 after appreciating to $1.3773 on Feb. 19, the strongest since Jan. 2. The dollar weakened 0.1 percent to 102.39 yen.

Consumer prices rose an annual 0.7 percent in January, in line with an estimate released Jan. 31, according to a Bloomberg survey before the European Union’s statistics office releases the data. An initial estimate for February to be released on Feb. 28 will show inflation stayed at 0.7 percent, remaining below 1 percent for a fifth month.

The euro has gained 1.9 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar fell 1.1 percent and the yen weakened 5 percent.

‘Any Action’

“We don’t see what is defined to be deflation,” Draghi said yesterday, speaking to reporters after Group-of-20 policy makers met in Sydney. “We are aware of the risks. The Governing Council is willing and ready to take any action in case these risks were to gain strength.”

Draghi said the council will have “the full set of information needed for deciding whether to act or not” by its next meeting on March 6, when it will publish its inflation projection for 2016.

The yen advanced versus 12 of its 16 major counterparts as the Shanghai Stock Exchange Composite Index (SHCOMP) dropped 1.8 percent.

China’s yuan dropped for a fifth day after the central bank lowered the currency’s reference rate amid concern the economy is slowing.

Industrial Bank Co. and other unidentified lenders have reduced loans to the property sector and related industries such as steel and cement, Shanghai Securities News reported, without saying where it got the information.

The yuan dropped 0.1 percent to 6.0984 per dollar after sliding 0.4 percent last week, the most since January 2012.