Dollar bounce short-lived as euro nears 3-yr high
London
The dollar index, which measures the currency against a basket of six major rivals, had slipped to its lowest since Sep 20 on Tuesday, as optimism about the eurozone economy drove the single currency above US$1.20 for the first time in 3½ months.
The dollar was given some reprieve on Wednesday, bouncing after strong manufacturing and construction data. It gained further support from the Fed's latest minutes, which indicated the central bank is still poised to raise interest rates several times this year.
But on Thursday it was back in negative territory, with its index down 0.3 per cent on the day, close to Tuesday's lows.
"This is just a continuation of the trend we saw into year-end, which was a weaker dollar," said BMO Capital Markets currency strategist Stephen Gallo, in London.
"We have decent expectations for global growth and global risk assets and, when you have above-potential global growth, the dollar tends to weaken because people don't need to hold safe-haven dollars."
The US currency was slightly higher against the yen, trading up 0.1 per cent at 112.61 yen on strong risk appetite across markets. It touched a 2½-week low of 112.055 on Tuesday after declining steadily from a high above 113.750 scaled in December.
After dipping in early trade in Asia, reaching as low as US$1.2005, the euro then bounced back to trade as high as US$1.2066 , up 0.4 per cent on the day and less than half a cent away from highs of US$1.2092 seen in December, the strongest since the start of 2015.
"We see some very positive euro sentiment in the market right now, and if it goes down too much against the US dollar that's going to begin again ... The market is not confident enough right now that levels below US$1.20 are justified," said Commerzbank currency strategist Esther Reichelt in Frankfurt.
"That might change with the US employment data coming in strong," she said, adding that US wages numbers due on Friday could be key in deter mining the dollar's direction. REUTERS
