The euro fell against the dollar and the yen on Tuesday after a senior European Central Bank (ECB) policymaker told investors that they may have missed the message on policy that rates are set to remain accommodative for some time to come.
Vice President Vitor Constancio told MNI news agency that the ECB made its forward guidance more precise at its March meeting by emphasizing the slack in the euro zone economy. The ECB still had policy ammunition in the form of lower interest rates or quantitative easing if needed, he said.
The euro dipped against the dollar to under $1.38 retreating further from the 2-1/2-year peak of $1.39 hit on Friday. The euro was down 0.2 percent at 143 yen, off a recent two-month high of 143.79 .
The euro raced higher last week as the ECB signalled it was unlikely to ease policy anytime soon, despite slowing inflation, and President Mario Draghi said the currency's strength was having only a marginal impact on imported inflation.
The yen edged up after the Bank of Japan stood pat on monetary policy and its chief, Haruhiko Kuroda, said there was no need to adjust monetary policy for now.
The BoJ maintained its stance on massive monetary stimulus, as widely expected, and stuck to its view that economic growth and consumer price increases remain on track. It downgraded its view of exports but upgraded its view of capital expenditure and industrial production.
The dollar was slightly lower near 103 yen, trading at the bottom of Tuesday's 103.19-103.43 yen range.
The yen is also a safe-haven currency, so it is being supported by worries over Chinese growth and conflict between Russia and Ukraine.
Analysts also said further yen weakness could come if the BoJ indicated it was ready to ease policy further to cushion the economy from the adverse impact of a sales tax hike.
The BoJ's next meeting on April 30 comes after a sales tax increase scheduled to take effect on April 1. The central bank will also release its semi-annual economic outlook then, which investors say could give it an opportunity to alter its outlook and justify a policy move.
Meanwhile, ahead of a widely expected rise in New Zealand interest rates on Thursday, the New Zealand dollar hit its highest since flotation against a currency basket in 1985.
On a trade-weighted basis, the kiwi rose as high as 79.68, according to Reuters data. The Reserve Bank of New Zealand is set to raise rates and lay out a path for a series of increases over the next two years, according to a Reuters poll.
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