The euro rallied on Thursday. How is the yen faring?

The common currency surged forward versus the U.S. dollar today. The European Central Bank has hiked its deposit rate by 350 basis points since July, reaching 3% overall. The officials aim to hinder soaring inflation. However, the ECB also clarified that future hikes would depend on the economic data. Refinitiv data showed that forex markets are pricing in two 25 basis point rate increases by the European Central bank by September.

Traders are focusing on the policy decisions today, while fears about the impending banking sector crisis receded significantly. In Germany, new reports showed that inflation might drop considerably in March. Energy prices also declined. Investors are waiting for Germany’s preliminary inflation figure, which is due later today.

Meanwhile, Spain reported that consumer prices in the country jumped by 3.3% year-on-year this month. That is the slowest pace since the one-year period through August 2021.

Goldman Sachs noted that the European Central Bank is wholly focused on core inflation dynamics. The eurozone core inflation might increase to 5.72% in Friday’s release. On Wednesday, ECB board member Isabel Schnabel stated that underlying inflation remains unshaken in the eurozone. She also added that the energy costs’ recent decline mightn’t bring inflation down as fast as some analysts expect.

On Thursday, the euro rallied by 0.3% to $1.0880. The currency seemed set to end March with a nearly 3% gain. On the other hand, the dollar index plummeted by 0.2% to 102.38. With the banking crisis, concerns faded, and investors turned to riskier currencies. The greenback might end this month with a 2.5% decrease. Moreover, analysts contemplate that the Fed might pause its rate hikes to avoid economic recession, especially after its two regional banks collapse. Such forecasts weigh on the dollar.

In Asia, the Japanese yen surged forward by 0.3% to 132.46 per USD. The yen had tumbled by 1.5% in the previous session, though. It has been very volatile as the Japanese fiscal year’s end approaches.

What about the EM currencies?

Asian currencies fluctuated on Thursday. The Thai baht added to its early losses. The currency shaved off 0.2% after climbing higher for two consecutive days. Despite that, the baht seems set to end March with a monthly 2.5% gain.

The Bank Of Thailand increased interest rates by 25 basis points (bps) yesterday. Traders expected such a hike as the country is trying to lower inflation. Meanwhile, the Philippine peso and Malaysian ringgit dropped by 0.1% each, while the South Korean won soared by 0.3%. The Singapore dollar remained the same.

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