The dollar turned negative against the euro on Thursday, reversing a morning rally that saw the greenback hit its highest against the euro in two weeks. The euro rose 0.1 percent against the dollar, recovering from selling earlier in the day triggered by comments from European Central Bank President Mario Draghi, who said the bank could launch additional stimulus at its next meeting on March 10. That pushed the euro below $1.08 for the first time in two weeks. The rally in the dollar was fleeting, however, as Draghi has disappointed investors in the past.
"I think people said, 'Wait a minute, let's think about December 3.' Draghi promised much the same and the world was short to the gills of euros, long dollars, and he underdelivered," said David Gilmore, partner at FX Analytics. In December, the bank disappointed investors after it said it would not add to its quantitative easing program. The move sent the euro up 3.1 percent on the day, its biggest one-day percentage climb since March 2009.
Investors had more than $44 billion worth of net long positions on the dollar in the week prior to the ECB's announcement, the largest dollar-long position in eight months, according to Reuters calculations and data from the Commodity Futures Trading Commission.
"There's a trust issue with the markets right now regarding Draghi," Gilmore added. "Many hedge funds who bet their whole year on that one trade were taken out and shot." The dollar did gain against the Japanese yen, rising 0.45 percent and moving comfortably above 117 yen on the day. The greenback had fallen to 115.97 in overnight trading, its lowest since January 2015.
The dollar index, which measures the US currency against a basket of six other major rivals, was largely flat, falling 0.05 percent to 99.025. The index rose to 99.799 during Draghi's speech, its highest since December 3. Oil rebounded from 13-year lows on Thursday and helped push oil-linked currencies like the Australian and Canadian dollar up broadly against their US counterpart. The Canadian dollar was last up 1.5 percent at C$1.4276 and the Australian dollar rose 1.4 percent to $0.7003.
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