The euro rose to a 15-month high against the dollar on Friday, supported by expectations of more eurozone interest rate hikes, while the prospect of a US government shutdown pushed the dollar lower across the board. The euro rose to $1.4422 on the EBS trading platform, helped by reported Middle East sovereign demand, though traders expected it to struggle to breach $1.4430, where there was talk of a large option barrier being defended.
The dollar fell to its lowest since December 2009 versus a basket of currencies as the White House and Congress worked frantically to break a US budget deadlock by the end of the day in order to avoid a government shutdown. Investors were also lured by the prospect of higher yield as buoyant equity and commodity prices buoyed their appetite for taking on risk. This propelled the Australian dollar to a fresh 29-year high versus the greenback and dented the low-yielding Japanese yen, which hit an 11-month low versus the euro.
"For euro/dollar the $1.50 level is a possibility in the next few months," said Dennis van den Bosch, senior portfolio manager in Henderson Global Investors currency team. FX market participants interpreted the comments as signalling progressive rather than aggressive rate hikes ahead, but analysts said the prospect of another rate rise this summer would continue to support the euro.
The euro was up 0.8 percent at $1.4413. Traders reported substantial option-related offers ahead of the $1.4430 barrier. A break of this level would target $1.4450, marking the 61.8 percent retracement of the move from the euro's record high above $1.6 hit in 2008 to the 2010 low of $1.1876. It would then be in sight of $1.4500 and the January 2010 high around $1.4580.
The dollar index lost more than half a percent, hitting a low of 75.100, while the higher-yielding Australian dollar jumped to a 29-year high of $1.0544. Helped by oil prices hitting a 32-month high, the Canadian dollar also hit its strongest in three and a half years versus the greenback at C$0.9526.
The US dollar rose against the yen, however, trading up 0.3 percent at 85.28 yen, near a six-month high of 85.53 hit earlier this week. The euro rose more than 1 percent to an 11-month high near 123 yen, according to Reuters data. This took it well above the top of the weekly Ichimoku cloud, a widely used Japanese technical analysis, at around 122 yen. A weekly close above there would be seen as a buy signal.