NEW YORK, Aug 23: The dollar rose to its highest level in at least four months against the euro, sterling and Swiss franc on Friday, buoyed by expectations of stronger economic growth in the United States.
Both the dollar and yen have advanced in the past several weeks, as the US and Japanese economies have exhibited signs of recovery. Meanwhile, the 12 economies that share Europe’s common currency have shown virtually no growth, with Germany falling into outright recession.
In recent days, US economic data has consistently exceeded expectations, in stark contrast to the relative underperformance of the euro zone. As a result, the euro has borne the brunt of the market’s disenchantment with European assets. It’s fairly clear that the US economic data has given the dollar a pretty good shove over the last couple of days, said Andrew Delano, currency analyst at IDEAglobal.
We’re also seeing some weak data out of the euro zone, he said. The US is ultimately going to lead the global cyclical story. The US is going to draw substantial capital flows going forward.
In late US trading, the euro changed hands around $1.0885 against the dollar, entrenched at its deepest trough since April 21 and off 0.30 per cent from its prior US close.
The US currency rose to its highest since Dec. 23 against the Swiss franc, trading near 1.4165 late in the session. Sterling fell to its lowest in four months against the dollar, orbiting $1.5750.
Meanwhile, the yen extended its rally after data showed Japan’s service sector grew 1.2 per cent in June versus the prior month, well above economists’ expectations. The Japanese currency hit a five-month high against the euro, below 128 yen in late dealings. The dollar bought 117.65 yen, its lowest in a month.
Japan’s cyclically sensitive economy is seen by many as having the most to gain from a global upturn and flows into Japanese equities have fueled the yen’s outperformance against both the euro and the dollar.
But Japan’s policy-makers have openly resisted the yen’s appreciation, for fear that it could undercut demand for the country’s exports.
On Friday, the Ministry of Finance’s vice minister, Zembei Mizoguchi, told reporters he did not see the conditions in place for the yen to strengthen further, hinting that officials would sell yen in order to weaken it, if necessary.—Reuters