Dollar Slides to 3-year Low as Euro Gains

By Updated at 2018-01-24 07:28:05 +0000


SINGAPORE (Reuters) - The dollar slid to three-year lows against a basket of major peers on Wednesday.

The euro climbed to as high as $1.2335 EUR=, its strongest level since December 2014, and was last up 0.2 percent at $1.2318.

Euro zone consumer confidence jumped much more than expected in January, data from the European Commission showed on Tuesday, helping to support the common currency.

Investors are also focusing on the European Central Bank’s meeting on Thursday for clues on the outlook for monetary policy.

The euro has rallied this year, boosted by growing optimism that a strengthening economy would prompt the ECB to signal a quicker end to years of efforts to stimulate the economy than previously forecast.

The U.S. currency’s yield advantage will start to erode as major central banks head toward unwinding their massive stimulus.

The dollar index .DXY =USD, which measures the greenback’s value against a basket of six major currencies, fell below the 90.00 threshold for the first time since December 2014. It was last down 0.2 percent at 89.935.

The dollar fell broadly, with the euro hitting a fresh three-year peak, while sterling rose to its highest level since Britain’s June 2016 vote to leave the European Union.

Against the yen JPY=, the dollar fell below the 110 threshold for the first time in four months.

The yen has gained a lift in recent weeks, after the Bank of Japan trimmed its buying of long-dated government bonds in market operations earlier this month, sparking speculation of an eventual exit from its large stimulus.

Analysts said such speculation continued to support the yen, even after BOJ Governor Haruhiko Kuroda on Tuesday stressed the importance of patiently continuing with powerful monetary easing.

“The dilemma here for the Bank of Japan is how do they temper investor expectations?” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

“This is the issue that’s on the table right now beyond the broader negative downtrend in the dollar,” he said.

At one point, the dollar slipped to around 109.80 yen, its lowest level since Sept. 15. It last changed hands at 109.92 yen, down 0.3 percent on the day.

The greenback has shed nearly 2.5 percent against the yen this month, putting it on track for its biggest monthly drop since January 2017.

“On the BOJ, they have just reaffirmed pretty much what we already know and what the market already knows, that they’ll continue to maintain an aggressive, powerful easing stance,” said Peter Dragicevich, G10 FX strategist for Nomura in Singapore.

That stance, however, has been factored in and market players are looking ahead to what the BOJ might do next, Dragicevich said.

“They are looking at the next potential, kind of incremental steps, whenever they may come,” he added.

Sterling, which has rallied recently on the back of growing optimism around Britain's chances of securing a favorable Brexit deal, gained 0.2 percent to $1.4023 GBP=D3. The pound earlier touched $1.4049.

Reporting by Masayuki Kitano; Editing by Sam Holmes and Richard Borsuk