Euro above $1.33 for the first time in three months

Last week in the currency markets, the dollar sharply fell as the prospects for tightening monetary policy in the U.S. diminished, while the euro strengthened as the European Central Bank showed no intention to further loosen its policy.

The euro exchange rate against the U.S. dollar jumped 1.7 percent last week, to $1.3215, and on Thursday, for the first time in three months, it broke above the level of $1.3300.

In relation to the Japanese currency, the price of the euro fell by 1.3 percent, to 128.90 yen.

The dollar also sharply fell against the Japanese currency, by 2.9 percent, to 97.55 yen. At one point, for the first time in two months, it dipped below the level of 97 yen.

The dollar came under pressure due to weak data showing that the U.S. economy is indeed growing, but not strongly enough for the central bank to reduce its stimulative monetary programs.

On the other hand, the euro exchange rate received a strong boost on Thursday after the statement from European Central Bank President Mario Draghi that he currently sees no need to introduce negative interest rates on deposits from commercial banks at the central bank.

At a regular meeting, ECB leaders decided that key interest rates would remain at current levels, a record low of 0.5 percent, while the deposit rate remains at zero percent.

Recently, there has been frequent speculation about a possible reduction of the deposit rate into negative territory to discourage commercial banks from holding money at the central bank and to encourage them to convert that money into loans to companies and households.

– Generally, Draghi showed less inclination to lower interest rates than expected. Although he stated that the ECB considered negative deposit rates, the mere fact that it has not done so yet was a strong incentive for the euro’s strengthening – said Omer Esiner, a strategist at Commonwealth Foreign Exchange.

The dollar only somewhat recovered on Friday, after data showed that in May, the number of employed in the U.S. increased by 175,000, indicating a moderate pace of employment in the world’s largest economy.

This data is considered extremely important as the Fed has indicated that it will reduce its bond-buying programs only when the labor market situation significantly improves.

– It could be said that the report is ‘barely’ better than expected, but I think the markets will take it as favorable news. However, there is considerable uncertainty regarding the direction of interest rates, so we have a volatile summer ahead – said Michael Woolfolk, a strategist at BNY Mellon.

In that uncertainty, last week the Japanese currency ‘benefited’ the most, as investors consider it a safe haven in uncertain times.