Euro Hits 4-Month Highs against Broadly Weaker Dollar

Euro Hits 4-Month Highs against Broadly Weaker Dollar
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(January 02, 2018) The euro rose to the highest levels in four months against the broadly weaker dollar in the first trading day of the year on Tuesday and was in striking distance of its 2017 peak against the greenback.

EUR/USD climbed 0.49% to 1.2065 by 08:47 AM ET (13:48 GMT), the highest level since September 8, not far from the two-and-a-half year peak of 1.2091 reached that day.

The euro zone manufacturing sector ended 2017 by ramping up activity at the fastest pace in more than two decades, according to data released on Tuesday and rising demand indicated that it will start the new year on a high.

The final reading of the euro zone manufacturing purchasing managers’ index jumped to 60.6 in December, the highest level since the survey began from 60.1 in November.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.48% to 91.55, the weakest level since September 22, pressured lower by the stronger euro.

The index ended 2017 down 9.8%, the biggest annual percentage decline since 2003.

The euro advanced 14% against the dollar in 2017, its best annual performance since 2003.

The dollar weakened in 2017 as the global economy gained momentum fueling expectations for tighter monetary policy in other countries, which would lessen the divergence between the Federal Reserve and other central banks.

Market watchers were looking ahead to Wednesday’s minutes of the Fed’s December meeting when it raised interest rates. Two officials voted against the rate hike amid doubts inflation would pick up as hoped.

The dollar extended losses against the yen, with USD/JPY falling 0.46% to a two-week low of 112.13.

Sterling rose to three-month highs against the dollar, with GBP/USD advancing 0.43% to 1.3559 after data showing that the UK manufacturing sector expanded strongly at the end of last year, although at a slower pace than before.

The UK manufacturing PMI fell to 56.3 in December from November’s 51-month high of 58.2. Output, new orders and employment all rose at solid rates, the report said.

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