Euro gains as dollar falls back on equity bounce
Published Feb 12, 2018 04:18AM ET
Euro gains as dollar falls back on equity bounce
By Tommy Wilkes
LONDON (Reuters) - The euro edged higher on Monday and the dollar fell back, as a bounce in equity markets ended a strong run for the greenback in which nervous investors had rushed to reverse their bets against the U.S. currency.
Some appetite for risk-taking crept back into currency markets after last week's slump, helping higher-yielding emerging market currencies as well as commodity-linked currencies like the Australian and Canadian dollars, although the gains were limited.
The dollar was down 0.2 percent against a basket of currencies, erasing some of the gains last week when the dollar enjoyed its best weekly performance since 2016.
Asian share markets found a semblance of calm on Monday as S&P futures extended their bounce, while European indexes opened higher as volatility eased back following last week's spike.
The sell-off last week spilled over into currencies, forcing many traders to unwind their bets on a stronger euro and to exit higher yielding but riskier currencies and seek safety in the Japanese yen and Swiss franc.
The moves in foreign exchange markets were far more muted than in other asset classes, however.
"We have a little bit of risk appetite back into the market," said Nordea Markets currency strategist Niels Christensen, adding that the U.S. consumer price inflation numbers due on Wednesday would be the decisive data for direction this week.
"The market is still extremely long positioned on the euro. These investors will be quick to reduce their positions," he said.
The euro was up 0.2 percent at $1.2275 after earlier hitting a day's high of $1.2298. The euro suffered its worst week since November 2016 last week.
Against the yen, the dollar also eased but it paused above a five-month low.
The dollar fell 0.1 percent to 108.69 yen, remaining above Friday's trough of 108.05 yen, its lowest level since Sept. 11. The dollar last week fell nearly 1.3 percent against the yen.
The yen tends to attract demand in times of market stress as the currency is backed by Japan's current account surplus, which offers it more resilience than currencies of deficit-running countries.
Reports late last week that the Japanese government had decided to nominate Haruhiko Kuroda for a rare second term as Bank of Japan governor when his current one expires in April, signaling the BOJ's ultra-loose monetary policy will remain in place, were seen as a factor that could potentially weigh on the yen and temper its gains.
Prime Minister Shinzo Abe's government is to present Kuroda's nomination to parliament later this month, a person briefed on the matter said on Saturday.
Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said on Monday: "It's not as if the dollar is going to rise sharply against the yen in the next couple of days just because Kuroda is set to be re-appointed".
Get The News You Want
"But once the market settles down, focus will probably return to differences in monetary policy... and that could give the dollar an upward bias against the yen," he said.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.