{"id":106205,"date":"2021-02-03T10:25:25","date_gmt":"2021-02-03T10:25:25","guid":{"rendered":"https:\/\/fin2me.com\/?p=106205"},"modified":"2021-02-03T10:25:25","modified_gmt":"2021-02-03T10:25:25","slug":"euro-hovers-near-two-month-lows-against-dollar","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/euro-hovers-near-two-month-lows-against-dollar\/","title":{"rendered":"Euro hovers near two-month lows against dollar"},"content":{"rendered":"
LONDON (Reuters) – The euro traded near a 2-month low against the dollar on Wednesday, as investors looked to a widening disparity between the strength of U.S. and European pandemic recoveries.<\/p> The view was bolstered by moves in Washington toward fast-tracking more stimulus spending that contrasted with concerns about extended European lockdowns and expectations for a decline in euro zone growth this quarter.<\/p>\n The single currency was little changed at $1.2036 against the dollar, in early London deals, after strengthening to $1.20115 overnight for the first time since Dec. 1.<\/p>\n While bond and stock markets cheered news that Italian President Sergio Mattarella was set to ask former European Central Bank chief Mario Draghi to form a government of national unity, the euro largely shrugged it off.<\/p>\n \u201cDraghi\u2019s acceptance of a mandate and indications of a majority backing him will likely be welcomed by markets and may give some further support to European assets,\u201d ING said in a note to clients.<\/p>\n \u201cThat said, the recent political turmoil in Italy has not generated any risk premia build-up on EUR\/USD or EUR\/CHF: thus, the upside potential from the end of the government crisis may also be somewhat contained.\u201d<\/p>\n The broader dollar index was mostly flat at 91.078 after rising to a two-month high of 91.283 in the previous session.<\/p>\n The greenback\u2019s advances come despite a rally in equities amid improving risk sentiment, defying the currency\u2019s historic inverse directional relationship with stocks.<\/p>\n However, many analysts expect the correlation to reassert itself as the year progresses, and for the dollar to decline as global growth recovers amid massive fiscal stimulus and ultra-easy monetary policy.<\/p>\n Elsewhere, the Japanese yen traded about flat against the dollar, after gaining to 105.17 overnight for the first time since Nov. 12. The dollar has benefited from a massive bout of short-covering, especially against the yen where hedge funds had racked up their biggest short bets against the greenback since October 2016.<\/p>\n \u201cIt\u2019s been a nice run for the yen in terms of strength, but I think there\u2019s maybe some tiring of that move and some retracement,\u201d said Bart Wakabayashi, Tokyo branch manager of State Street Bank and Trust.<\/p>\n \u201cI think 105.50 is a nice target, but I don\u2019t seen any real reasons right now that that move would be extended further.\u201d<\/p>\n Many see the dollar\u2019s rebound since early last month as a correction after its relentless decline last year, although some think the dollar\u2019s new-found firmness could reflect a retreat of the bearish sentiment on the currency.<\/p>\n The dollar index has rebounded 1.2% this year after an almost 7% decline in 2020.<\/p>\n The New Zealand dollar was a standout Wednesday after data showed the county\u2019s jobless rate unexpectedly dropped, which was seen as ruling out prospects for further central bank rate cuts.<\/p>\n The kiwi advanced 0.4% to 72.21 U.S. cents, backing away from those levels in London trading.<\/p>\n The Australian dollar added 0.1% to 76.14 U.S. cents, looking to snap a three-day decline.<\/p>\n