The euro hit all-time highs versus the yen and a 2-year peak against the dollar on Thursday, as investors looked to the European Central Bank to signal another rate hike soon after it held them steady this month.
As expected, the ECB left rates unchanged at 3.75 percent at its meeting on Thursday and the spotlight is now on a 1230 GMT news conference by ECB president Jean-Claude Trichet.
He is expected to confirm that at least one more rate hike is on the horizon and some investors are betting he could pave the way for a move as soon as May. "At this stage a strong majority in the market expect a June rate hike but the fundamental case for them to move earlier seems to be in place," CIBC World Markets European economist Audrey Childe-Freeman said.
"If anything the risk is that we could see the ECB adjusting to vigilant language at the press conference. It's not a question of if, but when for the next rate move."
The euro rose to a two-year peak of $1.3477, coming within two US cents of record highs hit in late 2004. Following a slight sell-off after the ECB rate decision, by 1200 GMT it was at $1.3460, up 0.2 percent on the day.
The euro hit record highs at 160.86 yen and 1.6452 Swiss francs, with the low-yielders coming under pressure. The dollar was little changed at 119.37 yen, near a six-week high around 119.55 yen struck the previous session.
The dollar showed limited reaction to Wednesday's minutes of the Federal Reserve's March policy meeting. The minutes showed policymakers said more rate hikes may be needed to keep inflation contained, contrary to market expectations for rate cuts from the current 5.25 percent.
"The fact that reaction was so limited shows the market wants to hold a medium term negative US dollar view," said Geoff Kendrick, currency strategist at Westpac. In the eurozone, a run of stronger than expected data has boosted expectations of another rate hike from the ECB by June, and perhaps as soon as May. Some analysts, though, say that the recent appreciation of the euro means the ECB may want to delay its next tightening for fear of choking growth. The Australian dollar rose to US $0.8271, its strongest since October 1990, after data showing a drop in Australia's jobless rate to a 31-year low solidified expectations for higher interest rates there.
Comments
Comments are closed.