The US dollar slipped to a more than three-year low against the euro on Friday as the common currency extended its gains on hopes that European Central Bank (ECB) policymakers are preparing to reduce their vast monetary stimulus program.
The euro gained 1.21 percent to US$1.2177, its biggest single-day percentage gain against the greenback in more than six months. The common currency gained 1.22 percent against the US dollar from last week’s US$1.2030.
On Thursday, the euro rose 0.72 percent against the US dollar after minutes of last month’s ECB meeting showed that bank policymakers could revisit their communication stance early this year.
Investors took that as a signal that the ECB will wind down its 2.55 trillion euro (US$3.1 trillion) bond purchase scheme this year if Europe’s economy continues to hum along.
“The latest ECB comments were a bit on the hawkish side, so that’s giving more life to the euro,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
The euro’s rise weighed on the US dollar index, which measures the greenback against six rival currencies. The index on Friday fell about 0.9 percent to 90.90, down 1.14 percent from last week’s 91.95.
A sharp rise in the British pound also dragged the US index lower. Sterling rocketed to its highest level against the US dollar since the vote to leave the EU, after a report that the Netherlands and Spain were open to a deal for Britain to remain as close as possible to the trading bloc.
“Anytime you hear Brexit going well it is going to give the pound a little bit of a boost,” Trang said.
Sterling on Friday rose 1.4 percent to US$1.3726, up 1.16 percent from last week’s US$1.3568.
Given the strong momentum in the euro and sterling, the US dollar failed to capitalize on data that showed underlying US consumer prices recorded their largest increase in 11 months last month, which bolstered expectations that inflation will accelerate this year.
“It may be a bit premature to jump on the inflation bandwagon. I would want to see at least a quarter or two of some solid numbers,” Trang said.
In Taipei, the New Taiwan dollar on Friday rose slightly against the greenback, adding NT$0.005 to close at NT$29.600. The local currency slipped against the greenback from last week’s NT$29.590.
Bitcoin on Friday rose 3.8 percent to US$13,749.05 on the Luxembourg-based Bitstamp exchange a day after it skidded more than 11 percent after the South Korean government said it was considering a plan to ban cryptocurrency trading.
Bitcoin is down about 19 percent from last week’s US$16,892.
Additional reporting by CNA
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