US Dollar hits fresh 7-month high against the euro

Frankfurt (Nov 17)  The dollar hit a fresh seven-month high against the euro and a one-week high against the yen during Asia trade Tuesday, indicating investor expectations for an increase U.S. interest rates next month that would bring added strength to the greenback remain intact.

The euro EURUSD, -0.1872%  declined to as much as $1.0656 in Tokyo midday, its lowest level since April 16, before rising to $1.0661. In early European trading hours, the euro was trading around $1.0654. That compares with $1.0686 late Monday in New York.

Tokyo-based dealers and analysts said Friday’s terrorist attacks in Paris would make the European Central Bank more inclined to ease its monetary grip when its Governing Council meets Dec. 3, a move making the euro vulnerable to selling pressure.

Against the Japanese currency, the greenback USDJPY, +0.07%  rose up to ¥123.40, its highest since Nov. 10, before falling slightly to ¥123.27 in early European trade, compared with ¥123.19 in New York.

The WSJ Dollar Index BUXX, +0.04%  , a measure of the dollar against a basket of major currencies, was up 0.16% at 90.68.

“Risk-off is gone now, as investors saw the U.S. and Europe stocks recovery,” said Akira Moroga, manager of forex products group at Aozora Bank. “The dollar buying is in progress on hopes for (the U.S. Federal Reserve) rate increase.”

In Tokyo, the Nikkei Stock Average NIK, +1.22%  closed up 1.2%.

The global financial markets’ response to Friday’s terror attacks in Paris was “only limited and short-lived,” as has been the case after previous terror attacks, said Mizuho Bank chief market economist Daisuke Karakama in a morning note. There had been concerns over the weekend that a pessimistic mood would strengthen the yen, due to the unwinding of yen short positions. But such fears “proved to be groundless,” said Karakama.

Investors are now focusing U.S. October inflation data later in the day in light of strengthening market expectations for a rate increase by the Fed, when it meets next month.

Source: MarketWatch