Euro exchange rate up again after three session drop
Published: 29 Aug at 9 AM
After declining for three sessions since Thursday, the euro rallied against the dollar again yesterday amid continued fears of more quantitative easing in the US and hopes that the European Central Bank will begin buying bonds from Spain and Italy.
Investors are also looking towards the end of the week when Fed chairman Ben Bernanke will speak at a central bankers’ conference. It is expected that he will again signal that QE3 easing in the US is likely, although he may stop short of revealing when exactly it will be introduced.
Any further easing is bad news for the dollar and positive for risk, as the Fed would effectively be printing money. It will, however, lift the euro, although key meetings of Germany’s Constitutional Court on September 6 and the troika’s ruling on September 12 are likely to have the biggest effect on the common currency.
After experiencing its best week in six months and hitting a seven-week high of $1.2589 on Thursday, the euro was back up from a subsequent drop to $1.2567 on Tuesday with a session peak of $1.2576.
The rise of 0.5 per cent is attributed by some to ECB President Mario Draghi’s cancellation of an appearance at the bankers’ conference in Jackson Hole. Mr Draghi said a heavy workload is his reason for non-attendance, prompting speculation that he is finalising policy proposals for the Eurozone debt crisis.
Meanwhile, the greenback dropped by 0.2 per cent to 78.51 yen, and the Aussie dollar hit a five-week low due to continued worries about the Chinese economy. The US dollar has been under pressure since last week when minutes of the latest Federal Reserve meeting hinted that a third phase of QE could be introduced soon.