The euro is up 3-month high against the dollar on expectations of a rate cut
The euro rose to a three-month high against the US dollar on Monday as the dollar continued to fall, with expectations that the Federal Reserve will cut interest rates later this year.
The euro was based on gains from last week, when it rose 1.4% and rose to 1.1387 overnight, the highest level since March 22. It traded at 1.1379 by 03:12 am EST (07:12 GMT).
The US dollar index fell against a basket of six major currencies in the shadows at 95.63, after falling to a night low of 95.57 after the Fed last week laid the foundation for a possible rate cut early next month.
This has affected the dollar and has in turn revitalized its counterparts such as the euro, which has its own problems, including Italy’s debt problem and the possibility of the ECB easing its policy.
“It is true that the ECB may have to soften policy, especially as the Fed has turned into a concession bias,” said Yukio Ishizuki, chief currency analyst at Daiwa Securities.
“But the ECB is already using a negative interest rate policy and does not have much more room for easing even if they want to, unlike the Fed, which are similar to those, which apparently supported the euro.”
The dollar rose 0.14% to hit 107.44 yen after hitting a six-month low of 107.04 on Friday.
The US currency has come under additional pressure against the yen, which is often a safe haven in times of political anxiety, as tensions between Iran and the United States intensify.
“It’s hard to see the dollar slide back below 105 yen because it is unlikely that there will be a steady flight of dollar assets,” said Koji Fukaya, director of financial products group in Tokyo.
“For example, the Standard & Poor’s 500 Index reached a record high thanks to potential interest rate cuts,” said Fukaya, “The strong risk appetite of investors slows down any journey to quality.”
The focus was whether Washington and Beijing could resolve their trade dispute at a summit in Japan this week for G-20 leaders from leading global economies.
China and the United States should make concessions in trade talks, Chinese Vice Minister of Commerce Wang Shuien said Monday.
The Australian dollar rose to a two-week high of 0.6961 earlier after RBA Governor Philip Lowe said it would be legitimate to question the effectiveness of global monetary policy easing to boost economic growth.
The comments were seen as less pessimistic, as Lowe said last week that Australia’s interest rate cuts to an all-time low of 1.25 percent would not be enough to revive economic growth.
The Australian dollar was already in full swing after rebounding from a five-month low of 0.6832 last week as the Federal Reserve’s tendency towards monetary easing helped offset the downward trend of possible policy easing in countries including Australia and New Zealand.
The New Zealand dollar hit a two-week high of 0.6605, although the Reserve Bank of New Zealand is expected to reflect the cautious sentiment of other central banks when the policy meeting is held on Wednesday.