Foreign exchange volatility fell to the lowest level in almost seven years as central-bank polices of monetary stimulus and forward guidance restrain price swings.

The yen strengthened earlier as a government report showed inflation accelerated to the fastest in more than two decades in April, reducing the prospect of additional stimulus by the Bank of Japan. The krona declined versus most of its 16 major peers after Sweden's economy unexpectedly contracted and amid speculation the Riksbank will cut rates. The Canadian dollar fell as first-quarter economic growth slowed.

“The forward-guidance policy by the central banks is keeping a lid on rate expectations,” said Peter Kinsella, a senior foreign-exchange strategist at Commerzbank AG in London. “We're increasingly going to see very flat volatility. It doesn't seem at present that there's going to be any catalyst to shake us from the malaise.”