Euro rebounds off 16-month low; US dollar surge pauses

London

THE euro rebounded on Thursday (Nov 18) away from 16-month lows versus the dollar as traders assessed whether the US currency's recent surge - fuelled by differing expectations for interest rate rises - had gone too far.

Markets have been betting that the European Central Bank will fall behind in tightening policy even as rising inflation prompts others, including the Federal Reserve, to raise rates over the next 12 months.

Stronger-than-anticipated inflation numbers in the United States last month, as well as punchy retail sales data this week, have reinforced those bets.

The euro, which on Nov 17 touched a 16-month low below US$1.13, rose 0.2 per cent to US$1.1345 in European trading hours on Thursday (Nov 18).

The dollar index, which measures the currency against a basket of 6 rivals, reached its highest since mid-July 2020 on Nov 17 at 96.226, but was last down 0.2 per cent at 95.654.

The New Zealand dollar jumped 0.7 per cent to US$0.7049 after a central bank survey showed near-term inflation is expected to rise in the fourth quarter.

The day before, sterling rose 0.5 per cent to a 1-week high against the dollar after a rise in Britain's October inflation piled pressure on the Bank of England to hike rates at its meeting next month.

The British currency was last at US$1.3493, unchanged on the day.

Elsewhere, Turkey's lira shed another 2.3 per cent and headed towards 11 per dollar after the central bank cut rates by 100 basis points to 15 per cent, even in the face of inflation near 20 per cent and the Turkish currency hurtling southwards.

The lira has lost 11.5 per cent of its value so far this month amid President Tayyip Erdogan's renewed criticism of interest rates and calls for stimulus despite the risks. It was last at 10.85, having hit a record low of 10.98 per dollar overnight.

Commodity-linked currencies were hurt by oil prices, which slumped to near 6-week lows.

The Canadian dollar was at a 6-week low. Markets are expecting the Bank of Canada to start raising interest rates early next year. The Norwegian krone also fell.

The Australian dollar touched a 6-week low of US$0.7263 but later bounced back, aided by the kiwi's rally, and was last up 0.3 per cent at US$0.7290. REUTERS