Until recently, the euro has been moving consistently higher against the other major currencies, at one point hitting highs of $1.20 and 140 yen. But its rise appears to have slowed now, with the new unified currency now stuck in the $1.17-$1.18 range.
One of the reasons behind this weakening was the June 5 decision by the European Central Bank to cut its key interest rate by 0.5 percentage points to 2 percent. In theory, a currency's exchange rates will fall after its interest rate has been cut, because that makes it less attractive to own. But right after the ECB's announcement, market players instead started selling the dollar -- whose interest rate had now gained relative to the euro -- pushing up the value of both the euro and the yen.
This happened because of widespread speculation that United States monetary authorities would follow the ECB in reducing interest rates. Unlike in Japan, there is still more room overall for cutting U.S. and European interest rates, and a rise in the yen would only be natural in such a situation.