The euro rose from an eight-week low against the dollar after European Central Bank President Jean- Claude Trichet said inflation remains the bank's top priority, signaling policy makers won't cut interest rates soon.
Inflation will stay high ``for a rather protracted period,'' Trichet said at a press conference in Athens following the ECB's decision to keep its main refinancing rate at 4 percent today. The yen rose against all of the major currencies on concern slowing global growth will prompt investors to sell higher-yielding holdings funded in Japan.
``The ECB's hawkish stance is still moderately bullish for the euro,'' said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. ``The ECB is in no rush to cut rates.
The region's 15-nation currency has gained 5.6 percent against the dollar this year. The yen rose 0.8 percent to 103.93 versus the U.S. currency, from 104.73 yesterday. It was up 0.6 percent to 160.20 against the euro, from 161.23.
``There's renewed worry that global growth just might not hold up,'' said Samarjit Shankar, director of global strategy for the foreign-exchange group in Boston at Bank of New York Mellon, the world's largest custodial bank, with more than $20 trillion in assets under administration. ``The euro zone is slowing down, while the ECB sticks to its hawkish tone.''
The pound was little changed against the dollar after the Bank of England kept its lending target at 5 percent. Sterling bought $1.9541, compared with $1.9539 yesterday.
The ECB has held interest rates at a six-year high to curb inflation. Consumer prices in the 15 countries that share the euro rose 3.3 percent last month from a year earlier after increasing 3.6 percent in March, the most in almost 16 years. The ECB, which aims to keep inflation just below 2 percent, has left rates unchanged since June of last year.
``The economic fundamentals of the euro area are sound, with ``moderate but ongoing GDP growth,'' Trichet said after the rate decision. ``However, the level of uncertainty resulting from the turmoil remains unusually high.''
The European Union reported yesterday that retail sales declined 1.6 percent in March from a year earlier, the biggest drop since the data began in 1995. The region's common currency has fallen 3.9 percent against the dollar since rising to a record $1.6019 on April 22.
``If the ECB begins easing to help support growth, the markets will focus on the narrowing interest differentials and sell off the euro,'' said Paresh Upadhyaya, a portfolio manager who helps oversee about $50 billion in currency assets at Putnam Investments in Boston. ``If inflation stays high and the economic data weaken, the euro also sells off.''

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OIL NYMEX +0.16 (+0.13%) $123.69


Japanese stocks fell the most in almost four weeks after U.S. regulators announced tougher disclosure requirements for investment banks, sparking concern more credit- related losses will be exposed.
Mizuho Financial Group Inc., Japan's third-biggest bank by value, tumbled the most in five weeks, while Orix Corp., the No. 1 non-bank financial company, plunged. Real-estate shares dropped after Daiwa Securities Group Inc. lowered its ratings on three developers.
Mizuho, which wrote down $5.4 billion in assets related to U.S. mortgages, lost 5.2 percent to 525,000 yen, after climbing by more than a half since the beginning of April. That was Mizuho's biggest drop since March 31. Orix tumbled 6 percent to 18,340 yen. Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by market value, slumped 3.7 percent to 1,117 yen.
Sumitomo Realty & Development Co., Japan's third-largest developer, dropped 3 percent to 2,710 yen after Daiwa cut its recommendation two levels to ``neutral'' from ``buy.'' Mitsubishi Estate Co., the No. 2 property developer, lost 3.7 percent to 2,890 yen.
European stocks fell for the third day this week as European Central Bank President Jean-Claude Trichet said inflation remains high and ``risks to growth prevail,'' while Munich Re and InBev NV posted profit that missed analysts' estimates.
Barclays Plc led financial shares lower after the ECB and Bank of England left borrowing costs unchanged to guard against inflation. UniCredit SpA sank as writedowns spurred a 51 percent slump in first-quarter earnings. Boliden AB, the second-largest producer of zinc in Europe, led a rally in commodities producers that limited the decline in the Dow Jones Stoxx 600 Index.
Barclays, the U.K.'s third-biggest bank, sank 2.5 percent to 463 pence. Royal Bank of Scotland Group Plc, Britain's second-largest, lost 1.9 percent to 357.25 pence. BNP Paribas SA, France's largest bank, dropped 1.3 percent to 68.89 euros.UniCredit slid 3.3 percent to 4.782 euros. Italy's biggest bank said first-quarter profit declined 51 percent, hurt by writedowns on asset-backed securities.
Raiffeisen International Bank retreated 7.8 percent to 100.1 euros after Austria's biggest bank by market value said first-quarter net income increased to 254 million euros from 193 million euros a year earlier. That missed the 260 million-euro median estimate of 10 analysts surveyed by Bloomberg.
Boliden led gains among commodity stocks after reporting first-quarter earnings which topped analyst estimates. Boliden surged 16 percent to 78 Swedish kronor. Net income climbed 37 percent to 1.26 billion kronor ($208 million) beating the 608 million kronor average estimate of analysts surveyed by Bloomberg.
Speculation of a 2,500 pence bid from Eurasian Natural Resources Corp. for Kazakhmys Plc helped shares of Kazakhstan's biggest copper producer, which gained 10 percent to 1,914 pence.

U.S. stocks rose, rebounding from the market's biggest drop in a month, as mining shares advanced on higher gold prices and sales topped estimates at retailers and media companies.
Freeport-McMoRan Copper & Gold Inc. led commodity producers to the biggest gain in the Standard & Poor's 500 Index. Wal-Mart Stores Inc. jumped as shoppers seeking discounts boosted sales. News Corp., the owner of Fox television, advanced the most in five weeks after revenue was lifted by advertisements for ``American Idol'' and the Super Bowl.
Seven of 10 industry groups in the S&P 500 advanced today, with financials posting the biggest decline. Benchmark indexes also gained after the government reported initial jobless claims dropped last week more than economists had forecast.
Freeport rallied 2.8 percent to $117.53. Gold rose to a one-week high as record energy costs and a weakening dollar boost demand for a hedge against inflation. The dollar fell against the euro and the U.K. pound after the European Central Bank and the Bank of England kept borrowing costs steady to fight inflation.
The S&P 500 Materials Index rallied 1.9 percent as 25 of its 28 companies advanced.
Wal-Mart climbed 58 cents to $57.41. Sales at stores open at least a year climbed 3.2 percent, beating the company's forecast for a gain of as much as 3 percent.
Wal-Mart closed at a three-year high of $58.61 on April 29. Costco, the largest U.S. warehouse-club chain, rose to a record $72.65 on May 6. Costco today said April sales at stores open at least a year advanced 8 percent, more than analysts estimated. The shares fell 20 cents to $71.88 today.
News Corp. rose 2 percent to $18.79. The media company controlled by Rupert Murdoch posted third-quarter revenue that topped analysts' estimates. Profit tripled from a year earlier, boosted by a gain from the sale of its stake in DirecTV Group Inc.