On Thursday, the euro was trading at 3-1/2 months lows versus dollar. However, growth-oriented currencies like the Australian dollar gained as a global market risk sell-off abated.
As strong earnings lifted stock markets, bond yields and stock markets, the U.S. dollar and the Japanese yen rose this week to their highest levels since the end of May and early-April respectively, investors began to withdraw from the safe-haven assets that they had built up.
They also bought back into cryptocurrency, with bitcoin climbing further above US$30,000, especially after Tesla CEO Elon Muss said that the company would “most likely” resume accepting bitcoin payments.
The European Central Bank is not expected to take any new measures, but the odds of policymakers promising to keep support longer and to increase bond-buying have increased following the tweak to the inflation target.
By 0800 GMT, the euro was trading at US$1.1790. This is just below its April lows of US$1.1752 on Wednesday. It is expected that the single currency will remain under pressure due to the ECB’s dovish pivot, at a time many of its peers are considering exiting pandemic-era stimuli.
“A lot of what happens today at the ECB hinges upon how inflation-averaging central banks Lagarde, and the press conference portray them to be,” said Stephen Gallo from BMO Capital Markets, European head for FX strategy.
“The more they are willing to accept a significantly higher inflation rate, the worse it will be for euro,” said the bullish sentiment for emerging market and commodity currencies.
However, he said that it all depended on the consensus within the governing board to extend bond-buying after pandemic-time stimuli expires in March.
After a three-1/2 month high of 93.194, the dollar index =USD, which measures currency against six major peers, fell to 92.75 on Wednesday.
Another safe-haven was the yen at 130 euro. This was a nearly four-month high of 128.610, but it was flat against the dollar at 110.3yen.
The Australian dollar traded at US$0.73675 after falling to an eight-month low US$0.72895 on the previous day. This was despite the fact that half of Australia’s population is under COVID lockdowns.
It also strengthened against the yen, which was at 81.07 after a peak of 79.85 5 1/2 months ago.
Investors can now see past the concerns about the Delta Covid-19 variant dampening the economic recovery and enjoy higher-risk assets.
Tapas Strickland, an analyst at National Australia Bank, stated that the consensus was that the Delta strain does not pose an immediate threat to recovery. This will delay reopening by three month maximum as countries increase vaccination drives.
Sterling recovered from five-1/2 month troughs and firmed to US$1.374. While in cryptocurrencies, bitcoin held Wednesday’s 7.9percent jump – the largest since mid-June. To trade just north at US$32,000.