Draghi seen putting a lid on euro as traders test pain threshold
[LONDON] The chances of verbal intervention from European Central Bank President Mario Draghi against the euro's appreciation increased after the currency climbed to its strongest level in more than two years versus the dollar, according to foreign-exchange strategists.
The currency, which broke above the psychological US$1.20 level for the first time since January 2015 on Tuesday, may see some profit taking in the near term, but banks have no doubts its trajectory remains bullish going forward, triggering an unwelcome tightening of financial conditions in the euro region.
"The question is now what the European Central Bank will do in September to calm down the market," Thomas Flury, global head of currency strategy at UBS Group AG, said in a phone interview. "Draghi really needs his talent to stop the move in euro-dollar." The euro has gained almost 14 per cent versus the dollar this year amid speculation the ECB will outline its intent to scale back its extraordinary package of quantitative-easing measures in the autumn. The ECB's next policy announcement is due on Sept 7. The shared currency dropped 0.2 per cent to US$1.1943 as of 9.51 am in London.
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