Investing.com - The euro pared back the day’s gains against the dollar on Thursday after senior European Central Bank officials reiterated that they are prepared to inject more stimulus if necessary.
EUR/USD slid 0.18% to 1.1381, off the five-and-a-half month highs of 1.1454 set overnight.
The euro was at one-month lows against the broadly stronger yen, with EUR/JPY dropping 1.46% to 123.28.
The ECB’s chief economist, Peter Praet, said the bank was prepared to do more if the euro zone economy was hit by fresh shocks.
“If further adverse shocks were to materialize, our measures could be recalibrated once more commensurate with the strength of the headwind,” he said.
The comments were echoed by ECB Vice-President Vito Constancio who said in a speech to the European Parliament that the bank will continue to do whatever it takes to pursue its price stability objective.
Separately, ECB President Mario Draghi warned that 2016 would be another challenging year in the bank’s annual report on Thursday.
“We face uncertainty about the outlook for the global economy. We face continued disinflationary forces. And we face questions about the direction of Europe and its resilience to new shocks,” the report said.
The euro remained supported against the broadly weaker dollar after Wednesday’s minutes of the Federal Reserve’s March meeting indicated that an interest rate hike at its meeting later this month is unlikely.
The dovish tone of the minutes underscored comments by Fed Chair Janet Yellen who said last week that risks to the global economic outlook justified taking a cautious approach to tightening monetary policy.
The dollar was hovering near five-and-a-half month lows against the other major currencies.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 94.45, not far from overnight lows of 94.24.
Lower interest rates make the dollar less attractive to yield seeking investors.
The dollar fell to fresh 17-month lows against the yen, with USD/JPY dropping 1.29% to 108.34.
The pair is on track for its fourth straight weekly decline and has fallen almost 10% for the year to date.
The yen extended gains from the previous session after comments by Japan’s prime minister indicated that authorities would not rush to arrest the appreciation of the currency.
Japanese Prime Minister Shinzo Abe said late Tuesday that countries should avoid weakening their currencies with "arbitrary intervention."
The yen’s gains have fueled speculation over how much higher the currency can climb before Japanese officials act to weaken it.
The Bank of Japan shocked markets with its decision to adopt negative interest rates earlier this year but the yen has continued to strengthen, posing a challenge to the central bank’s attempts to spur price growth.