The euro rose nearly one percent on the day to one-week highs against the dollar on Wednesday after surprisingly strong German consumer sentiment data, but thin year-end volumes sharpened price moves.
The GfK market research group's forward-looking gauge of Germany's consumer sentiment rose more than expected to 3.8 for January after a revised 3.4 in the previous month.
Nuremberg-based GfK attributed the sharp improvement in overall sentiment to the new government gaining people's confidence since taking office in mid-November.
"The GfK survey took the euro through $1.19 -- it rarely has such a significant impact on markets but we have thin trading volumes and liquidity," said Kamal Sharma, currency strategist at Bank of America.
By 1240 GMT, the euro stood at $1.1920, up 0.78 percent on the day, and close to earlier highs of $1.1930. It was up more than half a percent against the yen at 139.74 yen.
The dollar was fetching 117.08 yen, down slightly on the day.
High yielders bounced higher, with the Australian and New Zealand dollars gaining ground after sharp losses caused by carry trade unwinding.
The Aussie jumped one percent on the day against the US dollar as Sydney and London markets reopened after a 4-day break. The New Zealand dollar was also up more than one percent on the day after approaching a 5-month low.
Investors were waiting for the US Conference Board's consumer confidence index for December due at 1500 GMT. Economists forecast the index will rise to 101.8 from 98.9 in November.
"The data should show confidence recovering from its dip after the hurricanes," said Paul Robson, currency strategist at RBS Financial Markets.
"But it's hard to draw too much inference about prices early next year from the current price action."
Japanese Finance Ministry figures showed that Japanese investors bought a net 176.8 billion yen in foreign bonds last week, taking the total for the year to around 15.8 trillion yen. That outweighed a stampede by foreign investors into Japanese stocks and highlighted a reason why the yen has stayed so weak despite the Nikkei's 40 percent rally this year.
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