The ECB policy makers kept the benchmark interest rate unchanged today. However, the Euro jumbed the most since May as the European Central Bank failed to provide details on the size of a plan to buy private securities, curbing bets the purchases would expand the ECB’s balance sheet enough to weaken the currency.
“I wouldn’t want to emphasize the balance sheet size per se,” Draghi said at a press conference in Naples today. “That’s very important. But it’s only an instrument. The ultimate and the only mandate that we have to comply is to bring inflation back to level that is close but below 2 percent.”
Japan’s yen advanced as Vice Finance Minister Nobuhide Minorikawa said weakness in the currency is hurting some companies by driving up energy prices. ECB President Mario Draghi unveiled plans to buy covered bonds and asset-backed securities for at least two years.
The euro jumped as much as 0.6 percent, the biggest intraday increase since May 8, to $1.2692 before trading at $1.2637 at 10:20 a.m. New York time. It touched $1.2571 on Sept. 30, the lowest level since September 2012. The yen appreciated 0.3 percent to 108.61 per dollar, having reached 110.09 yesterday, the weakest since Aug. 25, 2008.
The purchase program is part of an easing plan that the ECB president previously said would steer the balance sheet back toward levels seen at the start of 2012, signaling as much as 1 trillion euros in assets could be added. The euro dropped the most since November 2011 after Draghi announced a final round of interest-rate cuts and the plan to buy privately owned securities at the central bank’s Sept. 4 meeting.
The yen rose for a second day after Minorikawa’s comments, which came after former finance minister Hirohisa Fujii said that further declines in the currency may trigger intervention. The Bank of Japan’s policy of monetary easing leading to a weak yen is mistaken, he said in an interview yesterday.
Implied volatility on one-month options for dollar-yen rose to 8.755 percent from 8.565 percent yesterday, poised for its highest close since March. The measure is used to set option prices and gauge the expected pace of currency swings. The average this year is under 7 percent.
U.S. factory orders dropped 10.1 percent in August, a government report showed, after climbing 10.5 percent the previous month.
The number of applications for unemployment benefits in the U.S. unexpectedly fell in the week ended Sept. 27, government data showed. American employers added 215,000 jobs in September, economists forecast before the Labor Department issues a report tomorrow. The gain in August was 142,000.