The euro posted its biggest advance in six months versus the US dollar after European Central Bank (ECB) President Mario Draghi pledged to buy bonds to contain the region’s debt crisis.
The US dollar weakened versus all 16 of its most-traded counterparts after a US Labor Department report showing payrolls rose less than forecast added to speculation the Federal Reserve would undertake a third round of bond buying.
The Canadian dollar rallied to the strongest level in a year after employment grew. The Swiss franc fell the most since November versus the shared currency on reduced demand for safety.
“Draghi and payrolls were the two main events of the week and in both cases the strong conclusion that followed both outcomes was that the cavalry had come in,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York. “The Fed and ECB are saying they’re underwriting risk, so there’s no point in sitting on cash. Sell the dollar, buy risk.”
The 17-nation euro advanced 1.9 percent for the week to US$1.2786, touching US$1.2817 on Friday, the highest level since May 22. The gain is the largest since the five days ended Feb. 24.
The shared currency had the largest weekly rise versus the yen since Aug. 17. It fetched ￥100.25, with a 0.7 percent gain, and reached ￥100.43, the most since July 4.
The yen rose 0.2 percent to ￥78.24 per US dollar. It touched ￥78.02, the strongest since Aug. 1.
South Africa’s rand was the biggest winner against the US dollar, rising 2.8 percent, while Brazil’s real had the smallest gain versus the greenback at 0.1 percent.
Further euro gains may be limited as the 14-day relative strength index for the euro versus the US dollar rose above the 70 level on Friday for the first time since May last year. A reading above 70 signals an asset may have rallied too far too quickly and is due for a correction.
The pound dropped 0.7 percent this week to ￡0.7985 per euro, after declining to ￡0.7994, the weakest level since July 5. The UK currency rose 1 percent to US$1.6016, climbing above US$1.60 for the first time since May 16.
Sterling has appreciated 1.3 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The US dollar weakened 2 percent, and the euro declined 3.4 percent.