Euro jumps on hawkish ECB signals, softer dollar

U.S. Greenback and Euro banknotes are seen on this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Picture

TOKYO/LONDON, Sept 12 (Reuters) – The euro jumped to a greater than three-week peak versus the greenback on Monday, as European Central Financial institution officers argued for additional aggressive financial tightening and the buck softened towards most majors besides the under-fire Japanese yen.

The European frequent forex rose 1.45% to $1.0198, its highest since Aug. 17, and nicely up from a 20-year trough of $0.9862 hit final week.

“Positions are fairly stretched, everybody and his canine has been lengthy greenback, and we had (ECB) feedback over the weekend, that are very hawkish and that fed this notion that possibly the market is overdone,” mentioned Jane Foley, head of FX technique at Rabobank.

Bundesbank President Joachim Nagel advised German radio over the weekend that if the image for client costs does not change “additional clear steps should observe.”

As well as, ECB policymakers see rising dangers they must elevate their key rate of interest to 2% or extra to curb report inflation within the euro zone, sources advised Reuters. learn extra

Foley mentioned the prospect of decrease U.S. inflation information on Tuesday was additionally pushing traders away from the protected haven greenback, although this was doubtless only a pocket of revenue taking.

“So long as the market is frightened of taking vital danger in excessive danger currencies the greenback might be agency for an additional six months or so,” she mentioned.

The euro’s energy was additionally seen towards the pound and it rose as excessive as 87.22 pence on Monday, its highest since February 2021.

The buck’s weak point on the day meant sterling was up round 1% on the greenback at $1.1695, its highest stage this month, marking a small restoration from final week’s 37-year low.

The greenback index , which measures the forex towards six main counterparts, was down 1% at 107.8, its lowest in two weeks and down from a two-decade peak of 110.79 reached on Wednesday.

Traders are cautious forward of the U.S. CPI report, which Commonwealth Financial institution of Australia analysts mentioned may decide whether or not the U.S. Federal Reserve will increase charges by 50 foundation factors or 75 foundation factors at its assembly subsequent week.

Fed officers continued their hawkish rhetoric on Friday, earlier than a black-out interval main as much as the central financial institution’s deliberations.

Fed Governor Christopher Waller mentioned he helps “a big improve at our subsequent assembly,” whereas St. Louis Fed President James Bullard reiterated his name for a hike of 75 foundation factors. learn extra

The greenback was regular towards the rate-sensitive Japanese yen, at 142.66 yen, a bit off its 24-year excessive of 144.99 hit final week.

Japanese officers over the weekend hinted at intervention to cease the forex weakening additional. A senior authorities spokesman mentioned in a neighborhood tv interview that the administration should take steps as wanted to counter extreme yen declines. learn extra

On the similar time, the Financial institution of Japan is unlikely to step in to assist the forex with increased rates of interest, sources advised Reuters. learn extra

The Australian greenback, which usually performs nicely when traders are constructive about development, was 0.5% increased at $0.6882 and bitcoin , which strikes in an identical method, was up 1.9% round $22,260, its highest since mid August.

Enhancing by Shri Navaratnam, Jacqueline Wong and Sam Holmes

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