LONDON The dollar's fall against the yen deepened on Thursday after minutes of the U.S. Federal Reserve's most recent policy meeting offered little optimism over the state of global growth and the prospect of a rise in interest rates in June.
The U.S. currency, hammered since late March by the latest retreat in expectations for any further rises in U.S. rates, fell 1 percent to less than 109 yen, its weakest in 17 months.
With oil up 1 percent and the prospect of any tightening of U.S. monetary policy receding, European stock markets scraped together some initial gains, but the mood remained fragile.
Chinese shares fell more than 1 percent and the broad Eurofirst index of Europe's leading companies is in its fourth consecutive week of falls, down almost 10 percent since the start of January.
A flood of money into the traditional safety of the yen has seen the Japanese currency gain 9.5 percent in the same period.
"We are in a broad-based soft dollar environment, and given the yen is cheap in relation to its long-term fundamentals, it is not surprising it is outperforming," said Petr Krpata, FX strategist at ING.
"The rise is leading to speculation of intervention by the Japanese. But we think the bar for that is pretty high."
The euro has also been gaining steadily. But its gains - at $1.1450 overnight it was up more than 8 percent since December - undermine one of the main pillars of the European Central Bank's push to refloat the economy, raising the question of whether policymakers will respond aggressively.
Four of the bank's governing council are due to speak at conferences on Thursday, with President Mario Draghi due to give a presentation to Portuguese leaders. The minutes of the bank's March meeting are also due at 1130 GMT.
"The main focus will be on speeches," analysts from French bank Credit Agricole said in a morning note.
"We see limited scope of the ECB sounding less dovish. This is especially true as Eurozone growth momentum remains broadly unchanged while medium-term inflation expectations stay close to historic lows."
By 0814 GMT, the single currency had retreated and was flat on the day at $1.1390.
The profit-eroding rise in the yen kept the Nikkei to a slight 0.2 percent gain despite a big bounce in the energy and healthcare sectors. The MSCI's broadest index of Asia-Pacific shares outside Japan was also in positive territory - ekeing out a 0.5 percent rise on the day.
A senior Japanese finance ministry official warned the move in the yen had been one-sided and that the ministry would take steps in the market as needed.
Bank of Japan Governor Haruhiko Kuroda also repeated that the central bank would ease policy further if needed, but the market seems to doubt he can do much more.
The drop in the dollar drove a 5 percent jump in oil prices overnight as U.S. inventories unexpectedly fell and investors gauged the possibility of an output freeze.
By 0853 GMT, Brent crude futures were up 18 cents at $40.02. U.S. crude rose 8 cents to $37.83.
(Additional reporting by Anirban Nag)
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