The euro rose to an eight-week high against the dollar on Friday before a speech by Federal Reserve Chairman Ben Bernanke which would push the US currency lower if he signals more monetary easing may be imminent. Following comments by European Central Bank executive board member Benoit Coeure, the euro also benefited from anticipation that the bank will announce clear steps to tackle the euro zone debt crisis at its policy meeting next week.
It rose 0.7 percent on the day to hit $1.2595, its strongest since early July, with traders noting buyers from the Middle East. It stopped just shy of a reported options barrier at $1.2600 and last traded at $1.2579. Expectations Bernanke will signal another imminent round of asset buying, or quantitative easing, have ebbed recently following better US economic data, allowing the dollar to recover. But some analysts said this has merely provided better levels to sell.
"Expectations have been pared back from one week ago and the risk/reward is shifting back towards a potential positive surprise," said Audrey Childe-Freeman, head of foreign exchange strategy at BMO Capital Markets. She said the euro may fall if Bernanke refrains from signalling more QE, but this would be an opportunity to buy the currency, which she believes has the potential to break higher towards $1.2762.
The dollar index, which measures the dollar's value against a basket of currencies, was down 0.5 percent at 81.316, nearing a two-month low of 81.221. "The market is being more realistic about what to expect. There's recognition Bernanke cannot pre-commit to easing at the September meeting, so we're likely to get a laundry list of what he could do if necessary," HSBC FX strategist Daragh Maher said. Atlanta Fed President Dennis Lockhart, seen as a centrist voter on US monetary policy, said on Thursday it would be a "close call" when central bank policymakers meet next month to decide whether to ease policy more.
Comments
Comments are closed.