Euro climbs due to ECB signals, weakening dollar
The euro climbed to a more than three-week peak versus the dollar on Monday. Moreover, European Central Bank officials stated for further aggressive monetary tightening and the greenback softened against most majors except the under-fire Japanese yen.
The European common currency went up around 1.5 percent to $1.0198, its highest since Aug. 17, and well up from a 20-year trough of $0.9862 hit last week. It inched up 0.88 percent at $1.01345.
“Positions are pretty stretched, everyone and his dog has been long dollar, and we had (ECB) comments over the weekend, which are very hawkish and that fed this perception that maybe the market is overdone,” head of FX strategy at Rabobank Jane Foley added.
Over the weekend that if the picture for consumer prices doesn’t change “further clear steps must follow”, according to reports of Bundesbank President Joachim Nagel to German radio.
Furthermore, ECB policymakers thin that growing risks they will have to boost their key interest rate to 2 percent or more to curb record inflation in the euro zone, according to Reuters.
“As long as the market is fearful of taking significant risk in high risk currencies the dollar will be firm for another six months or so,” Foley insured.
The euro’s strength was also witnessed against the pound and it hiked as high as 87.22 pence on Monday, its highest since February 2021.
The greenback’s weakness on the day meant sterling increased 0.8 percent on the dollar to $1.1678, and hit its highest level in the beginning of this month in London trading, marking a small recovery from last week’s 37-year low.
The dollar index, which measures the currency against six major counterparts, edged lower 0.67 percent at 108.25 down from a two-decade peak of 110.79 reached on Wednesday.
Investors are wary ahead of the U.S. CPI report. This includes statement of Commonwealth Bank of Australia analysts that said could determine whether the U.S. Federal Reserve rise rates by 50 basis points or 75 basis points at its meeting next week.
The dollar was flat against the rate-sensitive Japanese yen, at 142.66 yen, a little off its 24-year high of 144.99 hit last week.
Japanese officials over the weekend noted at intervention to stop the currency weakening further. A senior government spokesman informed in a local television interview that the administration must take steps as needed to counter excessive yen declines.
Meanwhile, the Bank of Japan is unlikely to step in to support the currency with higher interest rates, according to Reuters.
The Australian dollar, which typically performs well when investors are positive about growth, was up 0.34 percent at $0.6870. Bitcoin, which moves in a similar manner, inched up 1.3 percent around $22,100, having earlier hit highest since mid August.
