10.06.201406:41:05UTC+00Euro plunges as low volatility bolsters carry trade

The euro plummeted for a second day against the US dollar as a report reflected investor confidence dropped and record-low foreign exchange volatility amplified demand for higher-yielding assets.

The 18-nation common currency declined versus most of its 16 major counterparts. The Japanese yen decreased close to its weakest level in a month against the greenback as the country posted a current-account surplus in April that was smaller than predicted. Sweden’s krona tumbled despite bets the Riksbank will be pressured to reduce interest rates. Brazilian real surged the most in emerging markets.

“The euro right now is becoming the favorite funding currency of the carry trade. We’re seeing a lot of pressure on the euro as a result of that,” said Sireen Harajli, Strategist at Mizuho Bank Ltd.

The euro dipped 0.4% to $1.3594 as of 5:00 p.m. (New York time), after it fell $1.3503 on June 5, the lowest since February 6. The shared currency diminished 0.3% to ¥139.37. Japan’s currency went down 0.1% to ¥102.53 per dollar.