Draghi’s Virtuous Bond Circle Vicious for Currency

When the Federal Reserve and Bank of England raised the prospect of buying bonds to support the economy, the dollar and the pound tumbled. As the European Central Bank makes similar suggestions, the euro is rising.

That’s the perverse predicament facing ECB President Mario Draghi, who is trying to avert the risk of deflation that a stronger currency would exacerbate. Working against him is the wave of cash flooding into euro-region bonds as investors, including the world’s largest money manager BlackRock Inc., snap up the securities in anticipation of quantitative easing that may lower yields and push prices higher.