Foreign exchange volatility fell to the lowest level in almostseven years as central-bank polices of monetary stimulus andforward guidance restrain price swings.

The yen strengthened earlier as a government report showedinflation accelerated to the fastest in more than two decades inApril, reducing the prospect of additional stimulus by the Bank ofJapan. The krona declined versus most of its 16 major peers afterSweden's economy unexpectedly contracted and amid speculation theRiksbank will cut rates. The Canadian dollar fell as first-quartereconomic growth slowed.

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