Euro sinks to two-year low against dollar

December 3, 2014

London (Dec 3)  The dollar continued to climb on Wednesday, holding onto a seven-year high against the yen and hitting the strongest level in two years against the euro.

The euro EURUSD, -0.39%  was at $1.2333 from $1.2383, ahead of the closely watched European Central Bank meeting on Thursday. That level was the lowest for the euro since August 2012. The dollar USDJPY, +0.09%  was at ¥119.44 from ¥119.23 late Tuesday in New York after hitting ¥119.44 — its highest since Aug. 9, 2007.

Overnight strength driven by higher U.S. Treasury yields, buoyant stocks, lower oil prices and hawkish comments by Federal Reserve policy makers, carried through into early trading, pushing the greenback up.

With a bunch of factors continuing to support the dollar, “it wouldn’t be a surprise” if the dollar-yen pair tests the ¥120 mark later this week, said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow.

“It’s scary to think of the possibility of a fallback given the strength we’ve seen so far,” Sakai said. But the dollar is poised to continue testing its upside as “investors may lack a sense of accomplishment until the pair hits ¥120,” he added.

At the WSJ CEO Council in Washington, D.C., Federal Reserve Vice Chairman Stanley Fischer and WSJ's Jon Hilsenrath discuss the states of U.S. and global economies.

With an absence of new cues from the Japan side to contribute to the yen’s weakness, investors are likely to closely watch data and events in the U.S. In addition to closely monitored jobs data for November, investors are awaiting data later this week such as a private sector jobs report for November and the U.S. Federal Reserve Beige Book, both scheduled for release later Wednesday.

“If a slew of economic data (in the U.S.) later this week shows a firm tone, the dollar may try to reach ¥120,” said FPG Securities chief executive Koji Fukaya. But once it hits a high around that mark, the dollar may quickly face profit-taking as investors move to lock in their gains ahead of the holiday season, said Fukaya.

Comments by Federal Reserve Vice Chairman Stanley Fischer on Tuesday were among factors that may continue to support the dollar. In an appearance at the WSJ CEO Council meeting in Washington, Fischer said the U.S. central bank was closer to getting rid of its forward guidance that interest rates would be kept close to zero for a “considerable time.” But Fischer would not comment on whether the forward guidance would be changed at the next policy meeting in two weeks.

The WSJ Dollar Index BUXX, +0.08% a measure of the dollar against a basket of major currencies, was up 0.2% at 81.56.

The pound GBPUSD, +0.29%  traded at $1.5661, up from $1.5653 on Tuesday ahead of the U.K. government’s Autumn Statement.

Source: MarketWatch

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