Draghi's comments push euro to one-year high

London

THE euro surged to a one-year high on Wednesday, adding to its biggest daily gain in more than a year a day earlier following a change in tone by European Central Bank president Mario Draghi.

The hints in Mr Draghi's speech to a major central bank conference in Portugal convinced investors that ECB policymakers are ready to start withdrawing the emergency stimulus for the economy that has dominated policy-making for almost a decade.

That provoked the banking world's biggest cheerleader for a stronger dollar, Deutsche Bank, to abandon calls for a stronger greenback and instead call the end to a dollar rally dating back to 2014.

"Our main message is that the euro is likely to be the key vehicle via which financial conditions in the euro-area will be tightened," Deutsche analyst George Saravelos said in a note to clients on Wednesday. "We now see the risks as shifting towards an attempted break-out of the euro's multi-year 1.05-1.15 range to the topside."

Mr Saravelos, who at the height of the dollar's rally called for the euro to fall to US$0.85 by the end of this year, raised his end-of-year forecast from US$1.03 to US$1.16.

In Asian and early European trade, the euro rose another 0.7 per cent, adding to a 1.4 per cent daily gain on Tuesday. It traded half a per cent higher on the day at US$1.1365 by 1100 GMT.

The dollar also dipped a third of a per cent to 112.12 yen.

The latest failure of Republicans to pass healthcare legislation in the US also played into the dollar's weakness, further undermining faith in President Donald Trump's promises of other measures to support growth.

Eyes were again fixed on the central banking conference in Sintra, Portugal, with several ECB officials speaking, along with Bank of Canada governor Stephen Poloz and the Bank of England's Mark Carney.

The Canadian dollar, among the most volatile of the G-10 group of developed world currencies this year, gained almost one per cent against its US counterpart in morning trade in Europe. Mr Poloz and his deputy Carolyn Wilkins set the stage for hikes sooner than had been anticipated in appearances two weeks ago, although a dip in inflation since has cooled expectations of a move as early as July. REUTERS