The euro weakened sharply, and prices of German government debt rose, after comments by European Central Bank President Mario Draghi raised the possibility of easing measures to stave off deflation in the euro zone.
The euro dropped 0.4% against the dollar within minutes of the release of Mr. Draghi's statement, which signaled an increased willingness to consider additional stimulus measures to fight the risk of falling prices.
Central-bank stimulus measures tend to weigh on currencies. Ahead of Mr. Draghi's comments, the euro was trading around $1.391, near its highest levels versus the dollar since October 2011. It dropped as low as $1.3846.
The euro also fell 1.5% against the yen, to Y140.75. Some economists have said that a strong euro could potentially be a drag on Europe's economic recovery because it would make the Continent's exports less competitive.
Mr. Draghi's speech shows "the ECB has been more sensitive to the strength of the euro...than the consensus thought," said Daniel Brehon, a strategist at Deutsche Bank. "Wanting a lower euro is the same as wanting higher inflation."
Mr. Draghi also signaled the ECB was ready to take concrete steps, in a tone that was more forceful than many investors and analysts had expected.
"The ECB has been preparing additional non-standard monetary-policy measures to guard against" the risk of deflation, he said, adding the ECB "stands ready to take further decisive action if needed."
The euro zone grew 0.3% in the fourth quarter, its third consecutive quarterly expansion following an 18-month-long recession.
Euro-zone inflation is running at 0.8%, below the ECB's 2% target. Comments from Mr. Draghi also boosted prices of German government bonds as fixed-income investors bet further easing measures from the ECB would send bond yields lower.
The yield on the 10-year German government bond, known as the bund, fell by about 0.06 percentage points Thursday to 1.544%, according to Tradeweb.
When bond prices rise, their yields fall. The yield touched as low as 1.536%, the lowest level since July, according to data provider CQG.
"The bunds benefited marginally as Draghi's comments suggested the ECB was working on measures to address deflation concerns and the weak growth environment in Europe," said Adrian Miller, global markets strategy at GMP Securities.
Before Mr. Draghi's statement, bunds were already rallying along with Treasury bonds as investors sought out assets considered safe. Growing worries over Ukraine's political crisis and China's slowing economy prompted selling in U.S. stocks and boosted haven assets.
"The path of least resistance right now is lower in bond yields" amid the tensions surrounding Ukraine and tepid growth in Europe's economy, said Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Penn. The benchmark 10-year US Treasury note's yield fell by 0.07 percentage points Thursday to 2.658%.
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The euro dropped 0.4% against the dollar within minutes of the release of Mr. Draghi's statement, which signaled an increased willingness to consider additional stimulus measures to fight the risk of falling prices.
Central-bank stimulus measures tend to weigh on currencies. Ahead of Mr. Draghi's comments, the euro was trading around $1.391, near its highest levels versus the dollar since October 2011. It dropped as low as $1.3846.
The euro also fell 1.5% against the yen, to Y140.75. Some economists have said that a strong euro could potentially be a drag on Europe's economic recovery because it would make the Continent's exports less competitive.
Mr. Draghi's speech shows "the ECB has been more sensitive to the strength of the euro...than the consensus thought," said Daniel Brehon, a strategist at Deutsche Bank. "Wanting a lower euro is the same as wanting higher inflation."
Mr. Draghi also signaled the ECB was ready to take concrete steps, in a tone that was more forceful than many investors and analysts had expected.
"The ECB has been preparing additional non-standard monetary-policy measures to guard against" the risk of deflation, he said, adding the ECB "stands ready to take further decisive action if needed."
The euro zone grew 0.3% in the fourth quarter, its third consecutive quarterly expansion following an 18-month-long recession.
Euro-zone inflation is running at 0.8%, below the ECB's 2% target. Comments from Mr. Draghi also boosted prices of German government bonds as fixed-income investors bet further easing measures from the ECB would send bond yields lower.
The yield on the 10-year German government bond, known as the bund, fell by about 0.06 percentage points Thursday to 1.544%, according to Tradeweb.
When bond prices rise, their yields fall. The yield touched as low as 1.536%, the lowest level since July, according to data provider CQG.
"The bunds benefited marginally as Draghi's comments suggested the ECB was working on measures to address deflation concerns and the weak growth environment in Europe," said Adrian Miller, global markets strategy at GMP Securities.
Before Mr. Draghi's statement, bunds were already rallying along with Treasury bonds as investors sought out assets considered safe. Growing worries over Ukraine's political crisis and China's slowing economy prompted selling in U.S. stocks and boosted haven assets.
"The path of least resistance right now is lower in bond yields" amid the tensions surrounding Ukraine and tepid growth in Europe's economy, said Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Penn. The benchmark 10-year US Treasury note's yield fell by 0.07 percentage points Thursday to 2.658%.
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