AFP, TOKYO: The euro held most of its gains yesterday as the European Central Bank's increased economic stimulus fell well short of market expectations. Speculation had swirled for weeks that the ECB would  further loosen its grip on monetary policy and ramp up a vast bond-buying programme -- effectively pumping cash into the economy -- to breathe new life into the 19-nation eurozone. Those expectations sharply pushed down the euro, and revived talk that it may soon hit parity with the dollar for the first time since 2002. On Thursday, the bank cut deposit rates further into negative territory -- meaning lenders must pay to park cash with it and so look to loan more -- and extended the length of its bond purchases. However, the announcement left traders disappointed as it crucially failed to increase the size of the stimulus while the rate cut was less than hoped for. "It appears that ECB President (Mario) Draghi wants to keep some ammunition on hand if conditions worsen," Raiko Shareef, a currency strategist at the Bank of New Zealand, said in an email to clients. "But he has also hobbled his ability to move markets with rhetoric alone, since this recent experience has been much more talk than material action."
The news sent the euro soaring 3.1 per cent against the dollar Thursday and 2.6 per cent against the yen in US trading. On Friday in Tokyo, the common currency was slightly lower at $1.0920 from $1.0947 in New York and 133.95 yen against 134.23 yen. However, it is still well above the $1.06 and 130 yen levels in Asia Thursday before the ECB decision. Also Friday, Federal Reserve boss Janet Yellen said the US central bank remained wary of a interest rate rise because of concerns about a strong dollar and the divergence between its monetary policy and those of other central banks.