The euro rose to the highest in more than four years versus the yen after a German report showed Europe’s economic recovery may be gaining momentum, easing speculation the central bank will cut interest rates further.
The euro fell the most in two years versus the dollar after the European Central Bank unexpectedly cut its main refinancing rate to a record-low 0.25 percent to boost growth in the 17-member currency region.
Higher-yielding currencies including Mexico’s peso and South Africa’s rand rallied versus the dollar as a tentative U.S. agreement to extend the nation’s borrowing ability prompted an increase in investors’ risk appetite.
The yen fell the most this year versus the dollar since 1982 as Japan’s Prime Minister Shinzo Abe implements plans to boost economic growth and rid the nation of deflation. Federal Reserve discussions of reduced monetary stimulus also boosted the greenback against Japan’s currency.
The yen weakened for the first time in five days against the dollar as speculation Japan’s government will cut corporate taxes spurred stock gains and damped demand for the relative safety of the currency.
Optimism U.S. lawmakers are moving closer to an agreement to increase the nation’s borrowing capacity bolstered demand at the Treasury’s 30-year bond auction, tempering lackluster buyer interest at three- and 10- year note sales earlier this week.
The dollar fell against most of its major peers as Secretary of State John Kerry said the U.S. will explore a Russian proposal for Syria to turn over its chemical weapons while seeking approval for military strikes.