The euro hit an all-time high of $1.5980 against the dollar on Wednesday after eurozone inflation data rose to its highest level since the introduction of the single currency, denting expectations for a near-term interest rate cut in the region.
EDITOR’S CHOICE
Economists gloomier on German growth - Apr-17British consumers worry more about economy - Apr-17Jobs figures bring welcome relief - Apr-17China’s economy races on despite storms - Apr-16Lex: Taking hot money’s temperature - Apr-14G7 fears sudden slide in main currencies - Apr-13In contrast, US economic data boosted the chances that the Federal Reserve would cut interest rates at its policy meeting later this month, with a slide in US housing starts and subdued inflation data opening the way for further US monetary easing.
Analysts said rising oil prices, which surged to record high levels overnight, also weighed on the dollar.
Meanwhile, stability on global equity markets also put pressure on the greenback, reducing repatriation flows from US investors.
David Woo at Barclays Capital said given this backdrop, the risks remained in favour of further appreciation for the euro against the dollar.
“While there are few economic releases of note over the rest of this week, it seems likely that momentum will be sufficient to drive euro/dollar higher, particularly if oil prices and equities remain supported,” he said.
The euro rose to a high of $1.5977 on Thursday, just shy of its record high, before easing to stand flat at $1.5950.
The euro also rose to a record high of £0.8097 against the pound in Asian trade.
Like the Federal Reserve, the Bank of England has been cutting interest rates in the face signs that the fallout from the credit was spilling over in to the real economy. This has seen the pound fall to a series of all-time lows against euro.
However, the pound did receive some respite late in the session on reports, citing sources at the UK Treasury, that the UK could announce plans to ease tight conditions in the mortgage market as early as next week.
The pound rose 0.2 per cent to £0.8071 against the euro, edged 0.1 per cent higher to $1.9760 against the dollar and gained 0.3 per cent to Y201.32 against the yen.
Elsewhere, the yen also came under pressure, falling 0.2 per cent to Y162.57 against the euro and easing 0.1 per cent to Y101.91 against the dollar.
Analysts said stability on global stock markets had boosted risk appetite and driven investors away from the safe haven of the low-yielding yen.
Copyright The Financial Times Limited 2008
