Euro Slides as Trichet Signals Rate Rise Won’t Come in June; Yen Climbs

The euro dropped the most against the dollar in two weeks and slid versus the yen after European Central Bank President Jean-Claude Trichet signaled the ECB may wait until after June to raise interest rates again.

Japan’s currency climbed versus all of its 16 most-traded peers and reached the strongest level in six weeks against the dollar as falling commodities and stocks prompted investors to unwind bets in higher-yielding assets financed with yen. Currencies of commodity exporters including Australia, Norway, Canada and Brazil plunged.

“Mr. Trichet’s comments were not as hawkish as some people had anticipated,” said John McCarthy, director of currency trading at ING Groep NV in New York. “We’ve seen the euro come off against everything.”

Europe’s shared currency dropped 1.6 percent to $1.4588 at 11:14 a.m. in New York. It was the biggest intraday decline since April 18. The euro touched a 17-month high yesterday. It slid 1.8 percent to 117.39 yen, while the Japanese currency surged 0.8 percent to 79.93 per dollar.

The ECB left its main refinancing rate unchanged after boosting it a quarter-percentage point in April to 1.25 percent. Trichet, at a news conference in Helsinki, refrained from using the phrase “strong vigilance,” which might have signaled a June rate increase.

Trichet said inflation risks will be watched “very closely.” While inflation accelerated to 2.8 percent last month and economic growth is gaining momentum, higher borrowing costs may exacerbate Europe’s debt crisis, which has already forced Greece, Ireland and Portugal to ask for external help.