The Yen rose broadly on Monday as investors grew more risk averse while the Euro gave back small gain against the Dollar as the market weighed inflation remarks from monetary policy-makers. The Euro, coming off its worst week against the Dollar in 1-1/2 years, had edged up overnight after European Central Bank governing council member Axel Weber told a German newspaper the central bank had not relaxed its view on inflation. But it pared most of those gains in New York trade as fears of more credit fallout reinforced views that the ECB will have to cut interest rates this year.
Yesterday, EurUsd was unchanged at 1.4501, off the overnight high of 1.4577. The euro struggled last week after the ECB left interest rates at 4% and focused its policy statement on growth risks, cutting wording about pre-emptive action on inflation. Weber and ECB President Jean-Claude Trichet have since tried to refocus markets on euro-zone inflation, which recently hit a 14-year high. Analysts said the market was interpreting it all to mean the bank is moving into a neutral policy stance, a prelude to an eventual rate cut. UsdJpy fell 0.45% to 106.83 and EurJpy was down 0.52% at 154.91.
The weekend Group of Seven industrialized nations meeting in Tokyo offered little news for Forex markets. Finance leaders' focus on the crumbling US housing market and its impact on world economic conditions and bank lending added to risk aversion on the margins, helping the Yen. The language on currencies was largely a repeat of the previous statement, with the G7 saying exchange rates should reflect economic fundamentals. AudUsd was among the best performing, rising 0.88% to 0.9035 after the central bank warned it would likely need to raise interest rates again to counter inflation. The Reserve Bank of Australia hiked rates to an 11-year peak of 7% last week, and markets now expect another hike in March.