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Euro gets lift from Draghi, US Senate vote delay dents US dollar
[SINGAPORE] The euro stood tall near a 10-month high on Wednesday after the European Central Bank chief hinted the days of the ECB's aggressive stimulus are numbered, and as the US dollar was pressured after a vote on US healthcare legislation was delayed.
The euro was fetching US$1.1338, after surging 1.4 per cent on Tuesday and scaling a high of around US$1.1349, its strongest level since late August 2016.
That rally came after ECB President Mario Draghi said at a conference in Portugal on Tuesday that deflationary forces had been replaced by reflationary ones.
But any change in the ECB's stance should be gradual as "considerable" monetary support is still needed and the rebound in inflation will also depend on favourable global financing conditions, he added.
Traders said the euro could add to its gains in the near term.
"With the hawkish tone of Draghi, we should see European rates moving higher, especially on the 10-year part of the curve, and the euro I think has more room to move higher," said Tareck Horchani, head of sales trading Asia-Pacific for Saxo Bank Group in Singapore.
The euro now faces resistance at US$1.14, and could get a further boost if that level is breached, Mr Horchani said.
Against the yen, the euro rose to 127.47 yen on Tuesday, its strongest level since April 2016. It was last at 127.18 yen.
The US dollar nursed its losses, having come under pressure overnight after US Senate Majority Leader Mitch McConnell delayed a vote on healthcare legislation, hoping to get more support from Republican senators.
Market participants are concerned that the Trump administration will find it hard to follow through with tax cuts and fiscal stimulus steps, without first getting the healthcare bill passed.
The US dollar index, which measures the greenback against a basket of six major currencies, was little changed at 96.443, after shedding about one per cent on Tuesday.
Against the yen, the US dollar eased 0.1 per cent to 112.18 yen.