The euro hit its highest level against the dollar in more than three weeks after being boosted by hopes that Germany will agree to beef up the euro zone rescue fund before the Ecofin meeting this Friday. Today German Chancellor Angela Merkel said that Germany may back plans for the European Financial Stability Facility and the European Stability Mechanism to be combined, thereby increasing the rescue fund firepower.
Euro was also lifted by strong economic data from Germany, which showed the Ifo German business climate index rising more than expected for a fifth straight month, to 109.8 in March from 109.7 in February. Meanwhile, US Fed Chairman Bernanke’s speech also boosted the euro due to the weaker dollar. EURUSD hit its highest level since March 1 during the U.S. session, peaking at 1.3343 after rising from the session open level of 1.3236. EURJPY hit a high of 110.54 from 109.64.
The US dollar was weakened after US Federal Reserve Chairman Ben Bernanke said today that for the recovery of the US job market to be sustained, a more accommodative monetary policy is still needed. His comments fuelled speculation that the Fed’s ultra-low interest rate policy will remain intact and more quantitative easing could be likely. Usually this results in a weaker dollar.
GBPUSD rose to 1.5956 from the New York trading start of 1.5872.
USDCHF touched a three-week low of 0.9031 after plunging from 0.9106.
The Canadian dollar firmed against its US counterpart, to buy US$1.0094. USDCAD fell to a low of 0.9906.
USDJPY failed to rally higher after Bernanke’s speech, peaking at 82.99. A weaker yen due to carry trade selling helped support the USDJPY pair from a further decline below 82.59.
The Australian dollar rose as commodities, especially gold, advanced higher due to the weaker dollar. Australia is a major gold producer. AUDUSD rose to 1.0543 after opening New York trading at 1.0470.
Gold prices jumped to a two-week high on Bernanke’s dovish comments which weakened the dollar. Gold and dollar usually have an inverse relationship. Spot gold hit $1,689.13 to gain over $30 during the New York trading session.
Oil prices were also boosted as Bernanke signalled the possibility of more stimulus measures. Crude rose to as high as $107.31.