Euro rises to near 3-month high as US dollar falls

London

THE euro rose to a nearly three-month high on Thursday, as the US dollar went on the defensive on downbeat US economic data and optimism about coronavirus vaccines.

Investors sought riskier assets tied to global commodities and emerging markets, with the British pound close to a three-month high against the US dollar as traders also awaited details on trade talks between Britain and the European Union this week.

Pressure also mounted on the US currency after Federal Reserve minutes on Wednesday signalled the central bank is likely to strengthen their quantitative easing (QE) programme at the next meeting in December.

Although a few Fed policymakers were hesitant to make near-term changes to the guidance because of the uncertain outlook, "many participants judged that the Committee might want to enhance its guidance for asset purchases fairly soon", showed the minutes released on Wednesday from the Fed's Nov 4-5 meeting.

Lee Hardman, currency analyst at MUFG, estimated that the new guidance could see the Fed commit to continue purchasing at least US$120 billion per month of securities until it judges that it has made substantial progress towards its goals.

Euro/dollar was last trading up 0.1 per cent at US$1.1924 after rising to US$1.1941, its highest since Sept 1. An index which tracks the US dollar against a basket of currencies was flat at 91.99, though earlier it had achieved a near three-month low of 91.84.

Restrictive measures designed to slow the spread of the coronavirus in Germany will be in place until at least the end of December and possibly longer, German Chancellor Angela Merkel told parliament on Thursday.

The Australian dollar was down 0.1 per cent at 0.7358, though earlier it rose to a near three-month high of 0.7374, and the Canadian dollar was neutral at 1.3007 against the US dollar.

"A China-led recovery in the global economy and commodities should benefit commodity currencies," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo. "The outlook is good, but we are reaching levels where authorities might feel some concern. Other emerging market currencies with good fundamentals should benefit."

Sterling fell 0.2 per cent at US$1.3355 after rising to a three-month high of US$1.3399, and was also down by 0.3 per cent against the euro at 89.22 pence. REUTERS