Tech

Euro rallies to three-year high versus dollar after German coalition breakthrough

Euro rallies to three-year high versus dollar after German coalition breakthrough

"China is starting to rebuild its forex reserves so it does not make sense economically that China would want to stop buying USA treasuries", said Shuji Shirota, head of macro economics strategy group at HSBC in Tokyo. Currently, inflation is running at 1.4 percent in the 19 countries that use the euro currency.

Investors took that as a signal that the European Central Bank will wind down its 2.55 trillion euro ($3.10 trillion) bond purchase scheme this year if Europe's economy continues to hum along.

UK's benchmark FTSE 100 closed up by 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.23 percent, Germany's Dax ended down by 0.6 percent, France's CAC finished the day down by 0.3 percent.

The US dollar index traded marginally lower on Friday, extending the notable losses it posted on Thursday on the back of weaker-than-expected US producer price data and a stronger euro.

The dollar index fell 0.44 percent, with the euro up 0.7 percent to $1.2029.

Optimism about fourth-quarter earnings boosted stocks.

EUR/USD is likely to find support at 1.1913 levels and now trading at 1.2036 levels.

It skidded over 11% in the previous session after the government of South Korea, a crucial source of global demand for cryptocurrency, said it was considering a plan to ban cryptocurrency trading.

DailyFX US AM Digest US Dollar at Three Year Low versus the Euro
Euro rallies to three-year high versus dollar after German coalition breakthrough

When the euro was created some 15 years ago, there was speculation that the new currency might come to challenge the dominance of the US dollar as the worldwide reserve currency of choice.

The central bank left monetary policy unchanged at the mid-December meeting, but previously announced it would slow down its monthly purchases of bonds from €60bn to €30bn - an acknowledgement that less stimulus was needed.

Italy's 10-year government bond yield was down 8 basis points at 1.98 percent and the spread over the German equivalent was at its tightest since mid-December at 146 basis points at one stage.

Among other precious metals, silver rose by 0.24 percent to record $16.98 an ounce after hitting a two-week low of $16.86 on Wednesday.

It dropped again as the session wore on but was still close to five-month highs at 0.52 percent. Spot gold added $5 (+0.4%) to trade near $1,322/oz.

U.S. West Texas Intermediate (WTI) crude futures settled at $63.80 a barrel, up 23 cents, the highest since December 2014.

But growth is into its fifth year, employment is at a record high and convergence between the 19-member currency bloc's core and periphery has restarted, all pointing to unabated growth and a declining need for central bank help.

Brent crude prices hit $70 a barrel on signs of tightening crude stocks but settled off that level on Thursday, while a jump in energy shares helped lift US stocks.

More news: Bears expected to retain DC Vic Fangio


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