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The euro rose to its highest level against the dollar since April.
Written by article default Friday, 24 September 2010 13:04
Market OverviewThe euro rose to its highest level against the dollar since April after worse-than-expected U.S. economic data sparked fresh speculation the slowing recovery could lead the Federal Reserve to act to kick start the economy, weighing on the greenback.
EURUSD up sharply, at USD1.3469 from USD1.3317 late Thu.
The disappointing U.S. data contrasted with a round of better-than-expected figures released in the euro zone.
Despite the dollar's steep losses against its other rivals, the dollar remained in a tight range against the Japanese yen after having overnight spiked higher, a surge some traders attributed to possible Japanese intervention to stem yen strength; Japanese officials would not comment on the move.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 79.476 from 80.099.
Positive data in the euro zone, meanwhile, came on the heels of day-before data that showed a drop in the euro-zone purchasing managers' index, with a particularly notable fall in the Germany-specific index, triggering fears one of the region's primary economic engines was beginning to falter.
Also boosting sentiment toward the euro was news the French economy, another pillar of the region's growth, grew faster than initially estimated in the second quarter.
Meanwhile, the dollar fell back to day-earlier levels against the yen after having overnight surged against the Japanese currency; a move some strategists said showed telltale signs of intervention, though Japanese officials would not comment.
Overnight, the dollar jumped from around JPY84.60 to a fresh intraday high at JPY85.40 in a matter of minutes. The euro jumped from around YEN112.95 to a high at YEN113.75.
Market expectation
Concern the Fed could initiate another round of asset purchases, known as quantitative easing, continues to drive investors into higher-yielding currencies, analysts said, with the Australian and Canadian dollars each gaining around 1% against the greenback.
Quantitative easing would keep the U.S. dollar cheap, leading investors to use low-cost dollars to fund bets on riskier currencies.
Discussions about Yen movements during the Asian session remain. According to analysts, is not yet clear whether the Bank of Japan actually intervened on Friday or not. If it did the episode was botched since it was not communicated to the market at all unlike that of last week. If they did intervene it has been totally ineffective with the yen rising to a one week high.