The euro, the second best-performing major currency this year, has increased so much that it will weigh on economic growth in the euro region going into 2014, according to Nomura Holdings Inc.’s Jens Nordvig.
The dollar rose from the lowest level in a week as investors wagered the Federal Reserve is still moving toward reducing its bond buying after chairman- nominee Janet Yellen said it “will not continue indefinitely.”
The pound climbed to the strongest versus the euro in more than nine months after the European Central Bank unexpectedly lowered its benchmark interest rate, bolstering demand for alternatives to Europe’s shared currency.
The euro, which reached a two-year high versus the dollar this month, is poised to extend its gains as the European Central Bank’s audit of the region’s financial system encourages lenders to repatriate overseas assets.
The dollar traded at almost the weakest level in two years versus the euro after U.S. consumer sentiment fell to a 10-month low, adding to bets the economy is struggling and the Federal Reserve will delay cutting stimulus.
The dollar had its first back-to- back weekly losses against the euro in a month as weaker-than- forecast economic data added to bets the Federal Reserve will put off slowing stimulus to help the U.S. economy strengthen.
The government's inability to problem solve undermines the traditional safe haven appeal of government instruments, from T-bills to the dollar. Investors usually flock to 30-day T-bills as a place to hide during times of exceptional stress. Not now, however. Investors are demanding significantly more return to hold government paper, with a premium of 28 basis points today compared to 3 basis points nine days ago.